Home loan sanction letter

You might have come across terms such as co-owner, co-borrower, co-applicant, or a co-signer while applying for home loans. If you are not aware of the differences between these terms, it is important to understand before applying for a home loan. As, each role has different legal and financial obligations towards the repayment of the home loan, which makes it even more important to understand them in the detail and decide accordingly. Here we have described these home loan terminologies in detail to make you understand better.

To ensure the whole process of the home loan application gets right, you need to take care of everything right from filling up the application form to the final disbursement. Obtaining a home loan sanction letter from the bank or other financial institution is an indispensable part of this process. The lending institution undertakes a tedious process of checking all the documents submitted by the applicants and ensures that all aspects involved in the loan application are valid before sending them the sanction letter. The first-time home loan applicants must understand the various features and content of the sanction letter before signing the loan agreement.

Factors assessed before giving a Sanction Letter

The sanction letter is signed by the concerned authority to inform the applicants that they are eligible to get a home loan, and the same shall be approved subject to fulfilling the remaining formalities as prescribed by the lender. It is based on the findings of the lender after examining the following aspects:

  • Credit history of the applicant
  • Applicant's current income
  • Repayment capacity of the applicant
  • The correctness of all documents submitted by the applicant
  • Legal validity of the property being put through the home loan
  • The current and anticipated market value of the property, which will be mortgaged as security.

Contents of the Sanction Letter

The home loan sanction letter contains the following details:

  • The total loan amount to be sanctioned
  • The repayment tenure of the loan
  • The type of interest applicable i.e. (fixed or floating)
  • The actual rate of interest that is applicable on the loan at the time of disbursement
  • The base rate at which the interest is calculated
  • The EMI and pre-EMI amounts wherever applicable
  • The validity period of the sanction letter
  • The terms and conditions mentioned in the home loan agreement

The format of a home loan sanction letter may slightly vary from one financial institution to another. Therefore, it is essential to speak to the concerned customer relationship officer before signing the loan documents.

The validity of the Sanction Letter

The validity of a sanction letter is about six months, and if the loan is not availed during this time, the sanction letter will lapse, and the whole process will have to be done again by the applicants.

Documents required for a Sanction Letter

  • KYC documents such as Aadhaar Card, Voter's ID Card, PAN Card, Passport, and Driving License.
  • Latest salary slips or Form 16 (for salaried employees).
  • Proof of minimum business vintage of 5 years (for self-employed).
  • Both applicants also need to submit their bank account statements for six previous months as proof of income.

Note: The applicants may also be asked to submit additional documents before the final loan agreement is provided.