A Home Loan can help you fund the house of your dreams by offering you financial support. However, the Home Loan approval process contains various steps, from application to verification and approval. Let us understand which home loan is best for your financial needs.
A Home Loan sanction letter helps you make these decisions easily. But what is a Home Loan sanction letter, and why is it so important? Let us find out.
Understanding Home Loan sanction letters
A Home Loan sanction letter is an official document that your lender issues to you after your loan application is approved. This letter confirms that you are eligible for the loan amount mentioned by the lender.
The letter contains details about the Home Loan, like the loan amount, interest rate, repayment tenure, and terms and conditions that you and the lender must agree upon before issuing the letter. The sanction letter for Home Loans usually has a validity of 6 months, but it can vary depending on the lender.
Process of getting a Home Loan sanction letter
1. Application for a Home Loan
The first step is to apply for a Home Loan and submit all the necessary documents and details about your employment, income, and loan amount. You can either apply for a Home Loan by visiting your preferred bank or complete the entire application process quicker by applying online.
2. Processing of the loan
In case you have queries regarding the application process or what happens after you submit your application, you can reach out to your bank and clear your doubts as your application gets processed for further approval.
3. Verification by the lender
Once you have applied with relevant documents, your lender reviews your income, credit score, age, and other eligibility criteria to decide whether you are a safe candidate for a home loan.
4. Home Loan approval
If all your details pass the verification process, your application is approved, and your sanction letter gets issued. However, if your lender is unsatisfied with specific criteria, your application might be rejected. Remember, no housing loan sanction letter charges are applicable, and you do not need to pay any processing fees before the approval of your application.
Home Loan sanction letter format
The home loan sanction letter should ideally contain the following details about the loan approval:
- Name, address, and other details of the lender and the borrower
- The total loan amount sanctioned
- Interest rate on the loan
- Whether the interest rate is floating or fixed
- Per-month EMI payment details
- Tenure of the loan
- The validity period of the letter
- Loan repayment schedules with frequency, payment amount and due dates
- Details about prepayment and foreclosure charges (if any)
- Details of collaterals (if any applicable)
- Other terms and conditions that have been discussed and agreed upon by the lender and the borrower
- Signatures of the borrower and lender
Documents required for a sanction letter
- Identity proof: Aadhaar card, voter ID card, driving licence, or passport
- KYC documents: passport, driving licence, voter ID card, Aadhaar card
- Employment proof: a job card issued by NREGA duly signed by a State Government Officer or business proof for self-employed individuals
- Income proof: bank statements from the last 3 months and salary slips for the past two months
- Proof of income tax return: Income Tax Returns from the past financial year or as required by the lender
Depending on the lender, you might be asked to submit additional documents.
Difference between a sanction letter and a final loan agreement
The sanction letter for a Home Loan states you are eligible to sanction a home loan from the particular lender, but it does not legally finalise your loan sanction. This allows you to cross-check and compare your options with different lenders and understand which home loan is more affordable.
However, a final loan agreement is a legal document signed by both the borrower and the lender once the loan is finalised and ready to be sanctioned. It officially records the long-term financing details about the loan amount and completes the home loan approval process.
What is the importance of a sanction letter in the loan process?
The housing loan sanction letter is a reference point for you since it contains all the details about the loan amount, interest rate applicable, EMIs, and tenure. This helps you understand whether you can afford the loan expenses and compare your options with other lenders.
Sometimes, during the property buying process, the constructor might ask you for a Home Loan sanction letter sample before sealing the deal with you. In any monetary transaction, proof of communication mentioning every detail should be non-negotiable to avoid misunderstandings. A Home Loan sanction letter secures both you and your lender from any future disputes.
Also Read: Types of Home Loans: 5 different kinds of Home Loans
FAQ
What is a Home Loan sanction letter?
A Home Loan sanction letter is a formal document confirming your Home Loan eligibility. It includes all the details about the Home Loan you can avail of, depending on your eligibility.
What is the validity of a Home Loan sanction letter?
A Home Loan sanction letter's validity usually lasts up to 6 months from the date of issuance, but it can vary depending on the lender.
Can I apply for a Home Loan sanction letter online?
Yes, lenders and banks allow online Home Loan applications you can submit from the comfort of your home.
How is a Home Loan sanction letter different from an in-principle approval and disbursement letter?
A sanction letter states your eligibility for availing of the mentioned loan amount. At the same time, the in-principle approval depends on whether you meet the conditions proposed by the bank and may include a processing fee upfront. The disbursement letter is a legal document that finalises the loan agreement.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
