Everything you Need to Know About Your Home Loan Sanction Letter

Almost everyone wants to own a house someday. Many people look to home loans to buy the house of their dreams. Keep in mind that when you apply for a home loan, the lender/bank will ask you to fill a few forms and submit documents which provide proof of your financials, identity, and property. Home loans are usually of a huge sum of amount, so, it is crucial that every detail of the loan is documented. This will make it easier for you and the lender.

Prior to getting the final loan agreement, you will receive a home loan sanction letter. This is a letter confirming that your loan amount has been approved. Here are a few things you need to know about the home loan sanction letter:

  • Your sanction letter will be issued by the lender after your application has been processed and you meet the eligibility criteria for the loan.
  • Keep in mind that on the home loan sanction letter, the lender will offer you either the same terms by which you applied for, or adjust the terms. The adjustments to the terms of the loan will be based on your income, your credit history, eligibility, outstanding debts and your age.
  • The current value of your property which will be mortgaged and its potential appreciation value will also be taken into account while the lender writes the terms of the loan on the sanction letter.
  • Before accepting the home loan sanction letter, you need to check all details on this document. Make sure to thoroughly go through details like:
    • The total amount of loan sanctioned to you
    • The interest rate applicable on your home loan
    • The base rate on which your interest is being calculated.
    • Check whether the interest on the home loan is a floating or a fixed.
  • You can always use an online home loan EMI calculator to take a look at your possible EMIs.
  • Note that a sanction letter might even contain customised terms that the lender would include, so you need to carefully read these terms before accepting the home loan sanction letter.
  • A home loan sanction letter does not serve as a legal approval of your loan. Even after the sanction letter has been issued, you will be subject to background checks by the lender. You may even have to give additional documentation before you sign the final agreement.
  • The sanction letter is only valid for a fixed period of time. In most cases, this letter will be valid for six months, however, it may differ from one lender to the other.
  • If the mentioned time period has lapsed, then you can no longer accept the offer for the home loan based on the terms which were stated in the given sanction letter. In this case, you will have to reapply for the loan and a new sanction letter will be issued to you. This new home loan sanction letter may have terms which will differ from the previous document.
  • A lot of property developers will ask you to provide a copy of your home loan sanction letter before they finalise the purchase.

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Once you check the above details, you can take an informed decision on whether you should take the loan or not. You can also negotiate with the lender for a better offer on your home loan.

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