5 Important things to know about a home loan sanction letterMay 4, 2022 . Home buyer's education series . 10 min read
Home loans usually consist of very substantial amounts. Every loan document has to be confirmed in order to get such huge amounts. This is why the banks or lenders ask for proof of identity, property, and finance. The process of loaning homes can hence get quite lengthy and complicated because of the paperwork involved. A home loan sanction letter is given after the home loan application is successful. The terms and conditions of the loan are written in the letter, along with other crucial details.
Five important details about a home loan sanction letter
Below are essential details every home loan applicant should remember about home loan sanction letters:
1. Sanction letter content
Crucial details such as the complete loan amount, tenure of the loan, unrest rate that is applicable, and more about the loan agreement are provided in the home loan sanction letter.
The lender or bank will also include their own terms that they want in the loan agreement. These terms differ from lender to lender and, therefore, should be read thoroughly. You can also get to know your potential EMIs by going through the terms given in the sanction letter and using a home loan EMI calculator. After knowing these details, you can shop around for better offers, negotiate with the lender, or accept the loan and its terms.
2. Sanction letters do not state the legal approval of the loan
The sanction letter is different from the final loan agreement. Background checks and additional documentation/ paperwork will still be applicable to the applicant even after the sanction letter has been provided. There is also a sanctioned period, usually, six months, which varies from lender to lender for which the sanction letter is applicable. The letter cannot be accepted based on the terms stated in the sanction letter after this period is over.
The sanction letter should be read slowly and carefully. To completely decipher it, you can also take the help of a financial advisor or a lender. Once you have decided that you want to further the process of the loan, you will be asked to present a copy of the sanction letter and the requisite documents to the lender.
3. Documents required for the home loan sanction letter
The documents required for the home loan sanction letter include:
- Any one of your identification cards: Aadhaar card, voter ID card, driving license, or passport for KYC
- Employee ID card for salaried individuals
- Bank statement for the last 3 months
- Salary slips for the past two months or Form 16 for salaried applicants
- Proof of business and Income Tax Returns for the past three years for self-employed applicants
4. Your eligibility is important for a home loan sanction letter
The home loan eligibility of the candidate decides the amount that he/she can avail. The credit history, income, age, outstanding debts, etc., all make up the individual’s eligibility. After applying for a home loan, the application is processed, and the lender, based on your eligibility, either offers you the exact term of your application or adjusts the terms accordingly.
The current property value and possible value appreciation are also taken into consideration by lenders and banks when filing for a home loan application.
5. Difference between a sanction letter and an in-principle approval and disbursement letter?
The home loan sanction letter is a document that states that you are eligible for availing of the loan amount, while the in-principle approval is an agreement between you and the bank which grants you the home loan in principle. If you meet the conditions stipulated by them, the financial institution goes ahead with the approval of the home loan.
Generally, in-principle approval is issued for the lender’s pre-approved home loan products. A certain processing fee is charged and then adjusted in the total loan processing fees of the final amount provided.
In sanction letters, the bank or lender sends a legal representation to finalize the loan agreement.
The sanction stage of the home loan process is followed by the disbursal of the home loan amount. Whether you will receive the loan is decided in the sanction stage itself. This is why it is very important to understand the key details of the home loan sanction letter, making the entire process much easier.
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