Home Loan Sanction Letter: What is it? Why Is it Important?

The process of getting a home loan comprises several steps, starting from you filling out the loan application form and submitting it with the required documents. Then, after your documents have been validated, the loan is sanctioned. This is done through the loan sanction letter, which states the lender’s offer of loan amount and the borrower’s acceptance of the offer. When the sanction letter is signed by both parties, the loan is disbursed.

Among all these steps, the most important one is the sanction step, since this is when the loan is approved or rejected. A sanction letter is essentially proof that you are eligible for the loan amount.

What is a Sanction Letter for Home Loan?

A home loan sanction letter contains all the important information about your loan.

  • Lender’s willingness to disburse the loan
  • Total loan amount
  • Tenure for repayment
  • Base rate used for the calculation of interest
  • Interest applicable per annum
  • Type of interest applicable, such as fixed or floating
  • Validity of the sanction letter, which is usually 6 months
  • EMI and pre-EMI amounts, if any
  • Terms and conditions that borrower and lender agree upon before the loan is disbursed

Importance of a Home Loan Sanction Letter

A loan sanction letter is an important part of the loan process, because of the following reasons.

Proof of Loan Eligibility

Before a loan is disbursed, the sanction letter is proof of your eligibility for the loan. The sanction letter is a step closer to getting an easy home loan. Moreover, the sanction letter contains all information related to the loan, such as the total loan amount and the interest rate. This can help you calculate your approximate EMI payment and decide if you want the loan based on the result of your EMI amount.

Clear Understanding of Loan Terms

The home loan sanction letter contains all the loan terms as stated by the lender. You can understand how much loan amount you are eligible for, what is the loan tenure, and your interest rate for the loan. If you don’t agree with any of the loan terms, you can refuse the sanction. Otherwise, you can sign the sanction letter as proof of your acceptance of the loan term. And the loan will be disbursed to you.

Minimum Documentation Requirement

The documents required for getting a sanction letter are the same as what you submit during the loan application.

  • Photograph
  • Identity proof, such as PAN card or Aadhar card
  • Proof of residence
  • 3 months of salary slips
  • 6 months of bank statements
  • Processing fees payment receipt
  • Property documents

Proof Against Dispute

The letter is your proof of the loan offer and its acceptance. All the loan terms and conditions are included in the sanction letter. So if there is any legal dispute between the borrower and the lender over a breach of the terms and conditions, the sanction letter can be used to clarify the terms.

Required for House Purchase

When buying a home, if you have taken a loan, you need to submit the loan sanction letter among the other required documents. This letter is proof of your ability to buy the house.

Process for the Home Loan Sanction Letter

A home loan sanction is among the final aspects of your home loan application. Commonly, this letter is an indication of the lender’s approval of your loan application.

  • First, you need to fill out a home loan application
  • Next, you need to attach and submit all required documents with your application
  • The lender will then verify your application to check if you meet the loan eligibility
  • If you are eligible for the home loan, the lender issues a loan sanction letter with all the loan terms
  • The loan is final and approved only after you submit the signed sanctioned letter to the lender

Conclusion

A sanction letter is the last step in getting an easy home loan. When you receive your sanction letter for a home loan, read the terms and conditions carefully. Once you are satisfied with the lender’s offer, you need to share a signed copy of the letter stating your acceptance of the loan offer mentioned in the letter. After you convey the acceptance, the loan is disbursed to you in the stipulated time.

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