When applying for home loan, your lender – the Bank or NBFCs will need you to provide proof related to your identification, financials and property. Since home loans are usually of a substantial amount and usually longer tenure, it is important that everything is in order for both you and your lender. Before the final loan agreement is confirmed, you will be issued what is known as a ‘Home Loan Sanction Letter’, informing that you have been approved for the loan.
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Important Features of a Sanction letter –
Sanction letters are offered by lenders once they have processed your application and decided that you are eligible for a home loan. They may offer you the exact terms you applied for, or adjust the terms according to your eligibility, based on your income, your credit history, outstanding debts you may have at the time of your application and also your age, which gives an estimated idea to the lender whether your income and expenses are slated to increase or decrease. The lenders also take into account the current value of the property that will be mortgaged, along with the potential for its value appreciation.
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The home loan sanction letter will consist details about the loan agreement, specifically the total loan amount being sanctioned, the home loan interest rate that is applicable, as well as the base rate on which it is being calculated, whether the loan plan is a floating or fixed interest rate plan, and the total loan tenure. Based on the terms mentioned in the sanction letter you can use a home loan EMI calculator to check your potential EMIs from our website of Mudrahome.com. You can then decide whether to accept the loan, the mentioned terms, or negotiate with the lender or shop around for a better offer. The sanction letter may also include individual terms that the lender may wish to include, these varies from one lender to another so be sure to go through them carefully.
It is important to remember that a sanction letter does not state legal approval of the loan. The applicant, will still be subject to background checks and will have to provide additional documentation before the final agreement is formalized.
Additional Reading: Sanction Letter & Its Importance
It is crucial to know that sanction letters are valid only for a specified time period—often six months, though it depends on the lender. After the approved time period is up, you can not accept the loan offer based on the terms mentioned in the sanction letter. You will then have to again make a new application. You should also be aware that many property developers or buyers ask for a copy of the sanction letter before finalizing a purchase.
So, once you receive your home loan sanction letter go through the contents carefully. Don’t hesitate to talk to your lender or your financial advisor if you need any help in figuring out the details mentioned. Then keep all the documents ready which your lender will ask to take the process forward.
Read the documents and the clauses carefully to avoid any unpleasant surprises later on