The Home Loan Sanction Letter
The sanction letter is signed by the concerned authority to inform the applicant that they have been found suitable for a Home Loan, and the same shall be approved subject to fulfilling the remaining formalities as prescribed by the lender.
The sanction letter is based on the findings of the lender after examining the following aspects:
- Credit history of the applicant
- Current income of the applicant
- Repayment capacity of the applicant
- Correctness of all personal documents submitted by the applicant.
- Legal validity of the property being purchased through the Home Loan applied for.
- The current and anticipated market value of the property which will be mortgaged to the bank as security.
In most cases, the banks charge a processing fee for all the efforts that they put in to get the sanction letter ready. Note that most often this processing fee is not refunded even if the loan is not approved.
Contents Of The Sanction Letter
The sanction letter stating the lender’s readiness to proceed with the Home Loan will have the following details:
- The total amount of loan sanctioned
- The tenure for repayment of the loan
- The type of interest applicable on that loan (fixed, floating or hybrid)
- The actual rate of interest that is prevailing and applicable at the time of disbursement of the loan
- The base rate at which the interest is being calculated
- The EMI and pre EMI amounts wherever applicable
- The period of validity of the sanction letter
- The detailed terms and conditions that the lender desires to incorporate in the Home Loan agreement
The format of a Home Loan sanction letter might slightly vary from bank to bank. Therefore, it’s essential to speak to the concerned Customer Relationship Officer before signing loan documents.
Validity Of The Sanction Letter
The borrower must remember that the sanction letter in itself is not a legal approval of the loan and they still have to submit further documents and sign the loan agreement before the loan disbursal. The typical validity of a sanction letter is about six months and if the loan is not availed during this time, the sanction shall lapse and the whole process will have to be redone.
To ensure faster processing of the loan application, the applicant must keep all the required documents ready for further processing. This way, the process can be completed at the earliest. At times the applicant may also have to give a copy of the sanction letter to the developer of the project where they intend to purchase a house.
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