Sanction Letter : A home loan can help you fulfill the dream of owning a house. However, it can turn out be a lengthy process. Sometimes loan disbursal may take months even after the loan is sanctioned. Keep in mind that there are various documents that you need to take into account in order to get a home loan approval. For example, before providing you the final loan agreement, the lender hands over the home loan sanction letter, which confirms that your home loan application has been approved. This sanction letter contains necessary information about your home loan.  

Here is a brief guide on the home loan sanction letter.  

What Is a Sanction Letter?

A sanction letter is a legal document that is provided by the bank or financial institution with whom you have applied for the loan. However, it is issued only after the lender is satisfied with your eligibility. 

Before the lender provides you with the sanction letter, your home loan eligibility is evaluated carefully based on your income, credit score, financial stability and credit repayment behaviour. The lender also checks your eligibility, age, documents submitted, market value of the property. 

Contents of Sanction Letter

The home loan sanction letter contains all the details about the loan such as the loan amount, tenure, interest rate (whether fixed or floating) and the base rate at which the interest rate has been calculated. Basis the approved loan amount, you can calculate and determine your EMIs, keeping in mind your financial comfort. You can further decide if you want to avail the loan as per the given terms or try negotiating with the lender. If you are not satisfied with the lender’s terms, you can look for other lenders as well. The letter can also contain some specific terms customised by the lender. Therefore, you must read the letter carefully before accepting the offer. 

Validity

Home loan sanction letters have a specific validity period that is usually six months. Make sure that you respond to the home loan sanction letter before the validity ends. If you fail to do so, you will be unable to accept the loan offer. You might have to reapply for the home loan and get a new sanction letter. 

Conclusion

Keep in mind that a home loan sanction letter is not a legal approval. So, even after giving you a sanction letter, the lender might carry out further background checks or ask you for some documents as required. A sanction letter is an indication that the borrower has started your loan process. It reflects the willingness of the lender to give you a loan based on your eligibility. As it is a document confirming the loan approved by the lender, one should carefully read the sanction letter and point out discrepancies if any.