What is a Home Loan Sanction Letter and Why is It Important?
The process of getting a Home Loan is a long one, not only for you, but for the bank as well. Because of the importance of the whole process, it’s important that the bank’s intentions are clearly stated in a document of some sort, and that you read and fully understand it before signing on the dotted line. If you want to apply for a Home Loan in the most convenient way, apply online for Home Loan, with Bajaj Finserv. They only charge a 0.8% processing fee!
There is a document that helps you understand exactly what you’re getting into, and it’s called the Home Loan sanction letter. You’ve probably come across this term while doing your research. It’s clearly an important document, so, what is a Home Loan sanction letter?
When you take out your Home Loan, you’re making an important financial investment. The money involved is a vast amount, and so, you need to be aware of every little detail of the Home Loan sanctioning and disbursement process. This is the purpose that the Home Loan sanction letter serves.
What is the Home Loan Sanction Letter?
It is a formal acknowledgement from the bank stating that you’ve been found eligible for the Home Loan you’ve applied for. The letter indicates that the funds will be released to you as soon as the verification process is complete.
An important distinction that you need to understand is that the sanction letter is different from the final loan agreement that you will be signing. The sanction letter is simply the bank telling you that you are a suitable candidate for the loan.
The sanction letter has a validity of approximately 6 months. If the bank doesn’t finalise the loan within this period, you will have to be issued another letter.
What are the Contents of the Home Loan Sanction Letter?
What’s in this letter that makes it so important to the Home Loan process? It contains the following crucial information:
- It states the loan amount that you have been approved for. If this is not the full amount you requested, you will know for sure at this stage that you need to produce the rest of the funds yourself.
- It tells you what interest rate you have been given, and the type of interest rate whether it’s fixed or floating. Home Loan interest rates are a key factor that decide how much interest you will be paying over the course of the loan. Bajaj Finserv offers one of the lowest interest rates on Home Loans in India!
- It also lets you know how long you have to repay the loan. This is also called the tenure of the loan.
- The interest and the tenure of the loan determine the Equated Monthly Instalments (EMIs) that you will have to pay the bank. The letter also tells you of any pre-EMI charges that you’ll have to pay.
- The period for which the letter is valid is stated.
- The terms and conditions which you will have to follow are mentioned in the letter. Because of this, it’s very important that you read and fully understand everything in it.
When do You Receive The Letter?
The bank gives you the sanction letter after it examines all the documents that you have been asked to submit. The documents are examined to verify that you will be able to pay back the entire loan.
During this process, they take a look at your current income, your credit score, and the value of the property (both current and projected). Once they arrive at the conclusion that you will be able to keep up with the EMI payments, you will be sent the Home Loan sanction letter.
After you fulfil the conditions stated in the letter, the bank will get you to sign the final agreement, and you will receive the funds to purchase your home.