What is a home loan sanction letter?
A home loan sanction letter is a formal document issued by a lending institution, such as a bank or a financial company. This document confirms the lenders willingness to lend a specified amount of money to a borrower for buying a home. The letter contains details such as the amount of the loan, the interest rate, and the repayment period, as well as any other terms and conditions that the borrower must meet.
A home loan sanction letter is typically issued after the borrower has completed the loan application process. This process involves providing the lender with various documents and information such as income proof, employment details, credit history, and property documents. Once the lender verifies this information and is satisfied with the borrower's creditworthiness and repayment capacity, they issue a sanction letter indicating their approval of the loan.
It is important to note that a sanction letter is not a guarantee of a loan. The lender may still conduct further due diligence before disbursing the loan, and the loan amount may be subject to change based on the property's valuation and other factors. Nonetheless, a home loan sanction letter is an important step in the home buying process as it gives the borrower a sense of certainty and confidence while negotiating with the seller.
Process to get a home loan sanction letter
The process to get a home loan sanction letter typically involves the following steps:
Check your loan eligibility: Before applying for a home loan, it is advisable to check your eligibility criteria such as your income, credit score, age, and other financial obligations.
Fill the loan application form: Fill in the loan application form with accurate information and attach all the required documents such as income proof, employment details, credit history, and property documents.
Verification by the lender: Once the lender receives your loan application form and documents, they will verify the information provided and check your creditworthiness.
Get loan sanction letter: Once your loan application is approved, the lender will issue a sanction letter. The sanction letter includes the loan amount, tenure, interest rate, and other terms and conditions.
Property valuation: The lender may require a property valuation to determine the property's market value and the loan eligibility.
Loan agreement: Once the property valuation is done, the lender will prepare a loan agreement for you to sign.
Disbursement of the loan: After you sign the loan agreement, the lender will disburse the loan amount to the seller, and the property will be transferred to your name.
It is important to note that the exact process may vary depending on the lender and the type of home loan you apply for.
Also read: Step-by-step home loan process
Home loan sanction letter format
The home loan sanction letter format may vary depending on the lender, but it typically includes the following information:
- Name and address of the borrower and the lender
- Loan amount sanctioned
- Interest rate and type of interest (fixed or floating)
- Loan tenure
- Processing fees and other charges
- Terms and conditions of the loan, including prepayment and foreclosure charges
- Details of the property for which the loan is sanctioned, including the address and the property's estimated value
- Validity period of the sanction letter
- Any other specific conditions or requirements imposed by the lender
The sanction letter is usually addressed to the borrower and is a formal agreement between the borrower and the lender. It is important to carefully read and understand the terms and conditions of the sanction letter before accepting the loan offer. If there are any discrepancies or concerns, the borrower should clarify them with the lender before proceeding with the loan disbursement.
What is the Home Loan sanction letter format?
The Home Loan sanction letter format contains important details about the loan approval:
- The total loan amount you are approved for
- The interest rate you will be charged on the loan
- Whether the interest rate is floating or fixed
- The base rate used for calculating the interest
- The duration within which you need to repay the loan (tenure)
- Information about your monthly EMI payments
- The validity period of the sanction letter
- Any tax benefits you may be eligible for
- Details about any special schemes applicable to your loan
Importance of home loan sanction letter
The home loan sanction letter holds significant importance as it serves as crucial evidence of your eligibility for the loan even before you receive the formal loan agreement. This letter provides essential details about your loan, such as the approved loan amount, the interest rate applicable, the type of interest rate (fixed or floating), the tenure of repayment, and most importantly, the monthly EMI amount that you will need to pay.
Having access to these vital loan details empowers you to make a well-informed decision regarding your home loan. It allows you to assess whether the loan terms align with your financial health and repayment capacity. By knowing the monthly EMI amount beforehand, you can plan your finances accordingly and determine if the loan fits comfortably within your budget.
Furthermore, the home loan sanction letter serves as a crucial document during the process of purchasing a house. When you are buying a property, you may be required to submit a copy of the sanction letter to the developer, builder, or housing society. This letter acts as proof of your loan approval and confirms that you are financially capable of proceeding with the purchase. It instils confidence in the seller and facilitates a smoother and more transparent transaction.
What is a digital sanction letter?
A Home Loan Digital Sanction Letter is a modern and convenient way of getting your home loan approved. With digitalization, the home loan application process has become more straightforward. Many lenders now offer digital home loan applications, and if you qualify, you can receive a home loan sanction letter online.
The digital sanction letter is the electronic version of the home loan approval document that lenders send before finalizing the loan agreement. If you apply for a home loan with a reputed housing finance company or a top bank, you can easily receive the sanction letter through a hassle-free process. Checking your home loan application status online is also a breeze.
Benefits of a digital home loan sanction letter
A digital home loan sanction letter comes with the following benefits.
- Quick access
Once your application for the Bajaj Finserv online home loan is complete, the digital sanction letter is issued within minutes. With immediate availability, you can take a quick glance at the document to check the loan amount sanctioned along with the terms and conditions applicable.
- Lender comparison
A digital sanction letter is only an indicative document with all the terms of the home loan that a lender agrees to provide based on your eligibility. Once issued, you can compare these terms against offers from other lenders to make an informed decision.
- Extended validity
Bajaj Housing Finance Limited provides validity of up to 6 months for the sanction letter. You can submit it at any time within this validity to avail the loan amount you are eligible for.
- Serves as a document for house purchase
A digital sanction letter serves as proof of your eligibility to avail the required loan amount for a home purchase. You can thus avail the best deal on your chosen property from your real estate developer with a digital sanction letter in place.
Eligibility criteria for a digital sanction letter
The eligibility criteria for a digital sanction letter are the same as those for a home loan. Fulfill the following e-home loan requirements to receive the digital letter from Bajaj Finserv.
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Nationality
Indian
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Age
23 years to 70 years* for salaried individuals and 23 years to 70 years* for self-employed applicants
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Employment status
At least 3 years of experience for salaried borrowers, and at least 5 years of business continuity for self-employed individuals
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CIBIL score
750 or higher
Documents required for a sanction letter
Similar to the eligibility criteria, the document requirements to avail a sanction letter are the same as the home loan preconditions. They include:
- KYC documents:
1. Passport
2. Driving License
3. Voter’s Identity Card
4. Aadhaar Card
5. Job Card issued by NREGA duly signed by an officer of the State Government
6. Letter issued by the National Population Register - PAN card
You may also be asked to submit additional documents before the final loan agreement is provided.
Sanctioned limit in a home loan sanction letter
The sanctioned limit available in a home loan sanction letter varies from one applicant to another. It depends on factors like:
- Market value of the house property to be purchased
- Down payment
- Applicant’s eligibility, which includes income, age, employment status, i.e., salaried or self-employed, outstanding debts, credit history and score
Bajaj Finserv sanctions a substantial loan amount as an e-home loan based on these factors.
FAQs on Home Loan Sanction Letter
A loan sanction letter is a document issued by a bank or a housing finance company to the one who applies for a home loan. This letter is provided by the lender only after verifying the borrower’s eligibility for the home loan. The loan sanction letter informs the borrower about the possible loan amount that he is eligible for, including the proposed interest rate and loan tenure. The borrower’s income along with credit repayment behaviour and credit score, is extensively scrutinised before sending this letter to the borrower.
The validity of a home loan sanction letter typically ranges from 3 to 6 months, depending on the lender. The validity period is the period within which the borrower must complete the property purchase transaction and avail of the sanctioned loan amount.
After the validity period expires, the lender may review the loan application again and re-evaluate the borrower's creditworthiness before issuing a fresh sanction letter.
It is possible to get a home loan sanction letter online. Financial institutions offer the facility of applying for a home loan online. The process of applying for a home loan online is usually faster and more convenient.
A home loan sanction letter, in-principle approval, and disbursement letter are three different documents that are issued at different stages of the home loan process. Here's how they differ:
Home loan sanction letter: A home loan sanction letter is a formal document issued by the lender, which confirms that the lender has approved the borrower's loan application and is willing to sanction the loan amount. The sanction letter contains details such as the loan amount, interest rate, loan tenure, processing fees, and other terms and conditions. The sanction letter is issued after the lender has verified the borrower's creditworthiness and the property's value.
In-principle approval: An in-principle approval is a tentative or conditional approval given by the lender to the borrower, indicating that the borrower is likely to be eligible for a home loan. The in-principle approval is based on a preliminary assessment of the borrower's income, credit score, and other financial criteria. The in-principle approval does not guarantee a loan sanction, and the lender may conduct further verification and due diligence before issuing a formal sanction letter.
Disbursement letter: A disbursement letter is issued by the lender after the home loan is sanctioned and the property documents are verified. The disbursement letter confirms that the lender has disbursed the loan amount to the borrower or the seller, as per the terms and conditions of the loan agreement.
In summary, the home loan sanction letter is a formal approval for the loan amount, the in-principle approval is a tentative or conditional approval, and the disbursement letter is issued after the loan amount is disbursed.
