Know the important facts of home loan sanction letter
Having a house of your own is one of the most blissful things. To make that happen, you must not only have a lot of responsibility, but also adequate financial support. To get a good financial backup, you need a home loan that gives you the right boost and freedom to move forward with your dream. Having said that, knowing everything about your home loan, from the eligibility criteria to the documentation process, is of utmost importance.
Out of all the documents in your home loan pile, the home loan sanction letter is the most important. It is of great significance and is issued by your bank after the approval of your loan. Do you want to know the details about home loan sanction letters? Well, then keep scrolling through this article because it has all the answers to the questions you have got.
This article will help you navigate through the home loan sanction letter, its significance, and its contents. We will also go over some important facts that you should be aware of.
What is a home loan sanction letter and what is its significance?
A home loan sanction letter is a piece of documentation that your lender or bank gives you after your loan is sanctioned. It is one of the most important documents in the whole procedure. It shows that you have gotten permission to take the loan from the bank. It also states that you and the bank have reached a mutual agreement on all the terms and conditions regarding the home loan.
After you submit all your legal documents, like your ID proof, address proof, income proof, credit score, etc. The bank verifies all these documents. After verification, the bank gives you a home loan sanction letter stating that it agrees to sanction you the loan amount.
What are the contents of a home loan sanction letter?
A home loan sanction letter contains the following details about the loan:
The loan sanction letter for the home loan consists of the loan amount that the bank has agreed upon. Then it shows the loan tenure within which you have to repay the loan. It also shows the type of interest that you have chosen (fixed interest or floating interest). Apart from that, it shows the rate of interest at which you are willing to pay your instalments and the base rate at which the total interest is calculated.
Then the home loan sanction letter shows the pre-EMI and the EMI amounts that apply to the loan. Besides all these, there is some other minute information, like the validity of the sanction letter. At the end of the letter, there are a set of terms and conditions on the loan from the bank’s side.
What are some of the important things you need to know about a home loan sanction letter?
There are some important things that you should know about a home loan sanction letter to avoid confusion.
1. It is not equivalent to a loan agreement letter.
Many people confuse a home loan sanction letter with a loan agreement letter. But, they are not the same. It is a precursor to an actual loan agreement. So, getting a sanction letter doesn’t mean that you have been given the loan amount by the bank. It means that you are completely eligible to get the loan and that your request to get the loan is approved.
Following a home loan sanction letter, a loan agreement is a final letter that your bank provides you. It is proof that you have agreed to the terms and conditions regarding the loan that is provided by the bank.
It also states that you have agreed upon the interest rate, the loan amount, the loan tenure, the estimated EMI, etc. So, getting a home loan sanction letter implies that you have been approved to have the loan. But, the disbursal is yet to happen.
2. You need to show multiple documents to get a home loan sanction letter.
You have to show many documents and get them verified by the bank to get a home loan sanction letter. The documents include your KYC details, like your Aadhar Card, Voter ID Card, PAN Card, etc. You also have to show your bank account statements and the IT returns for the financial year, respectively. To get the home loan sanction letter, you also have to show your salary slips, work experience, and credit score.
3. Receiving the home loan sanction letter takes some time.
It is also true that it often takes up to 10 days to receive a home loan sanction letter. You should be able to understand that the entire verification process, along with repeated checks, takes some time. For self-employed individuals, this period is even longer because of the additional documents and multiple verifications required.
Conclusion
To sum it up, a home loan sanction letter tells you that you are completely eligible for the loan and have received approval from the bank. But, you should know that a sanction letter is not a loan agreement letter. It means you might be approved by the bank, but the loan amount has yet to be disbursed. A home loan sanction letter is a very crucial document that contains all the terms of the loan and is the only physical proof that says you are sanctioned to get the loan.
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