When you are planning to purchase a home and apply for a home loan to get the desired funds, you must know about the home loan process, which has three stages – application, sanction, and disbursal. Whilst all the stages are important, the sanction stage is critical as it is the stage when your loan is approved or rejected.
After you submit the home application form to the lender, they verify the details and documents you submit and depending on whether you meet the criteria or not, they approve or disapprove. Once the lenders approve your application, they issue a sanction letter. It is a critical document and acts as a proof that you are eligible to borrow the approved amount.
What is a sanction letter and what does it entail?
A sanction letter is essentially a document that financial organisations give to the borrower stating that their home loan application is approved. It contains terms and conditions on which the loan is approved and vital loan-related details, including.
- The approved home loan amount
- The interest rate levied by the lender and nature of interest (floating or fixed)
- The repayment tenure
- Mode of repayment
- EMI amount
- Pre-EMI amount (if any)
- Special discount under any government scheme (if any)
What is the home loan sanction process?
The home loan approval is not as overwhelming as it may seem. It starts with the borrower submitting the application form along with the necessary documents. The lender then verifies the documents and other details as mentioned in the form.
They also verify the borrower’s creditworthiness through various credit bureaus and evaluate the property’s actual value. If the lender is happy that you meet all the requirements, they will issue the sanction letter confirming the loan approval.
Generally, the approval process takes a few days. However, there could be a delay in the process if the lender feels that the lender has not provided sufficient information about the property or not submitted proofs. In such cases, they may put the sanction on hold.
What is the importance of a sanction letter?
When you apply for home loans in India, the sanction letter you receive from the lender serves as the proof of loan eligibility and approval. It gives you a clear idea about the EMI you must repay every month and the letter also contains other details. Thus, it plays a critical role in helping you decide whether you want to proceed with the borrowing process or reconsider. If you think the EMI is too high or if you are not happy with the terms, you can negotiate with the lender and request them to revise the same.
A sanction letter is a critical document that you must submit to the builder or the housing society during the home purchase. Additionally, it serves as a proof in case you get into any legal dispute with the lender in the future over breach of terms and conditions.
What happens after you receive the sanction letter?
Once the lender issues a home loan sanction letter, you must sign the same to confirm your acceptance of the offer and submit a copy of the same to the lender. Make sure to read through every tiny detail of the loan terms and conditions before you sign it. Once you submit the signed letter, it means you accept the offer, and the lender will proceed with disbursal.
The sanction letter is a legal document that you must keep safe to defend your case in the event of a legal issue arising with the lender in the future.