Home Loan Sanction Letter- Everything You Need to Know

Due to a rising demand for both commercial and residential property, India’s real estate market is growing at a rapid pace. It is estimated that this sector will contribute around 13% to India’s GDP by 2025.

The availability of home loans as affordable funding options for individuals looking to secure financing for house purchase can be one of the reasons for such demand.

These advances are one of the most popular financing options selected for house purchase. One thus needs to gain a thorough understanding of all the steps involved in a home loan application procedure to avail hassle-free financing when planning to purchase a new house.

A home loan sanction letter is an essential aspect of such financing.

What is a Home Loan Sanction Letter?

When an individual applies for a home loan, lending institutions determine if he or she is eligible for a credit or not by considering a few factors. If the applicant is deemed eligible to apply for a loan, he or she is sent a confirmation letter by the lending institution known as the home loan sanction letter.

At this point, borrowers should keep in mind that a sanction letter is not a legal agreement for loan disbursal.

Further, formalities need to be completed before the lending institution disburses the loan amount.

Factors that Determine the Issue of a Sanction Letter

The following factors that determine the issue of a sanction letter include:

  • During the application procedure, an applicant needs to submit some documents. The lending institution goes through these documents to verify whether all the information provided by an individual is authentic.
  • The financial institution also verifies all documents related to the house property being purchased alongside its current market value to determine the loan value.
  • They also run a hard enquiry to check the applicant’s credit history and assess his/her repayment behaviour.
  • Bank account details, employment details, etc. are also verified by the lender to assess an applicant’s repayment capability.

A home loan sanction letter is thus issued after such qualification.

Components of a Loan Sanction Letter

A housing loan sanction letter contains the following details:

  • The loan amount that an applicant is eligible for
  • Interest rate applicable
  • Benchmark rate to which the floating interest rate is linked along with applicable spread
  • Loan tenor for repayment
  • EMI amount
  • Processing fees and other charges
  • Applicant’s address
  • Home loan sanction letter validity period
  • Terms and condition of the lending institution

The validity of a home loan sanction letter is usually for six months. An applicant needs to accept the terms of the credit within this period, else the validity expires and one needs to apply again.

Nevertheless, one must only avail a home loan after conducting proper research on it. You should also know why it can be the perfect time to buy your dream home before applying.

Also, compare loan offers from different lending institutions to determine the most suitable option. For this purpose, you can also use home loan EMI calculator to compute an affordable EMI option. Apart from this, there are also other benefits of calculating EMIs before taking a home loan that you should know.

To use the calculator, the following data needs to be entered which can be found on sanction letter of home loan.

  • Loan amount
  • The interest rate specified by the lender
  • Tenor

Based on these details, the calculator will display the total loan liability by the tenor’s end, total interest payable and the EMI amount. The loan EMI calculator can be accessed on the respective lender’s website.

Besides this, renowned lending institutions also provide pre-approved offers to borrowers which facilitate hassle-free and quick loan processing. These offers can be availed on financial products like home loans, loans against property etc. You can check your pre-approved offer by entering your name and contact information.

Once you decide to opt for a lender who has already sent you a home loan sanction letter, you need to place a request for loan disbursal. At this stage, you will need to provide original property documents to the lender. Once the agreement papers are signed, the loan disbursal procedure is initiated.

Conclusion

So to that we can conclude that a home loan sanction letter format is usually based on your eligibility, and you can always calculate your eligibility online prior applying for any home loan, just by using a home loan eligibility calculator in order to get an idea of the amount which you can get from the lender.

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About FinanceGAB

Ajeet Sharma is a financial blogger and I am blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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