When you apply for a home loan in India, the lender may evaluate your home loan eligibility by considering various factors such as your monthly income, repayment capacity, debt obligations, credit score, and employment history among many others. Moreover, the lender may also ask you to furnish documents that provide proof of your financials, identity, and property. Following this, if the lender finds you eligible for a home loan, they will provide you with a sanction letter.
A home loan sanction letter is a document issued by the lender to notify that you are eligible for a home loan. However, it is to be noted that the sanction letter is not the final loan agreement. It only indicates that you can start the loan process, and the lender is willing to grant the home loan based on certain terms and conditions.
The lender mayprovide the sanction lettereither with the same terms that you applied for, or adjust the terms based on your income, credit history, eligibility, outstanding debts, and age. The home loan sanction letter will consist of some important details about your home loan, which are mentioned below:
Contents of a Home Loan Sanction Letter
- The total loan amount sanctioned
- Repayment tenure of the home loan
- Type of interest applicable, i.e. fixed, floating, or hybrid
- The base rate on which the home loan interest rate is calculated
- Monthly Equated Instalment (EMI), and the pre-EMI amount, if required
- The validity of the sanction letter
- Other terms and conditions set by the lender on the home loan agreement
As mentioned above, keep in mind that a sanction letter isn’t the legal approval of your home loan. Even after receiving the sanction letter, you will be required to clear background checks by the lender to avail of the loan amount. Moreover, the lender may also ask you to furnish additional documentation before the final disbursement of the loan.
In most cases, the validity of the sanction letter is for six months. If the home loan isn’t disbursed within the specified timeframe, you will have to re-apply for the loan. The lender may then offer you a new sanction letter.
You must go through all the terms and conditions mentioned in the sanction letter carefully. This will help you avoid any inconvenience while servicing the loan. Also, if you spot any incorrect information in the sanction letter, you must raise it with your lender and get it fixed at the earliest. This is because any wrong information can lead to the rejection of your loan application. As a home loan borrower, you should be aware of the loan disbursement process, as it will help you understand what steps need to be followed from the time the home loan is sanctioned until it is disbursed.
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