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Home Loan Sanction Letter And Its Importance

By Finserv MARKETS - Aug 13,2019
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Home Loan Sanction Letter And Its Importance

Buying a home is a dream of every individual. With the help of home loans, people across the country have realized their dream of purchasing their own house. With an increase in the number of financial institutions and online lenders in our country, availing a home loan has become a comparatively hassle-free process. However, since availing a home loan is a huge financial decision, the borrowers must be vigilant throughout the entire process of applying for a home loan. It is essential that the borrowers fill the online application form carefully. The lenders approve the home loan only after scrutinizing all the mandatory documents submitted by the borrower. Post verification of the documents, the borrowers receive the home loan sanction letter from the financial institution.

If you are a first time home loan applicant, it is essential that you carefully understand the various features and content of the home loan sanction letter.

What is a Home Loan Sanction Letter?

It is a formal letter signed by the concerned authority to inform the home loan applicant that they have been found suitable for the home loan, and the same shall be approved subject to fulfilling the remaining formalities as prescribed by the financial institution.

Before providing the sanction letter to the home loan applicant, the lender examines the following aspects of the applicant:

  • Credit history of the applicant
  • Current income of the applicant
  • Repayment capacity of the applicant
  • Authenticity of all personal documents submitted by the applicant.
  • Legality of the property being purchased through the home loan.
  • The current as well as the expected market value of the property which will act as the collateral to the home loan.

Content of the sanction letter:

  • The total sanctioned home loan amount
  • The repayment tenure of the loan
  • The type of interest applicable on that home loan, i.e. fixed, floating or hybrid
  • The actual rate of interest that is prevailing and applicable at the time of disbursement.
  • The base rate at which the rate of interest is being calculated
  • The EMI as well as the pre-EMI amounts
  • The validity of the sanction letter
  • The terms and conditions incorporated by the lender on the home loan agreement

The format of the home loan sanction letter may vary from one financial institution to another. In case of any query, you must contact the concerned representative and get your doubts cleared. This will help you avoid any inconvenience in the later stage.

What is the validity of a home loan sanction letter?

  • Home loan borrowers must make a note that the home loan sanction letter is not a legal approval of the loan. Borrowers are required to submit further documents and sign the home loan agreement before the disbursal of the loan amount.
  • The validity of a home loan sanction letter is about six months and in case, the borrower does not avail the loan amount during this time, the sanction shall lapse. The borrower will have to go through the entire process once again to avail the home loan. This process can be time-consuming and hence, it is always recommended that borrowers should avail the home loan within six months of getting the home loan sanction letter.
  • In order to ensure smooth and quick processing of the loan application, applicants must keep all the required documents readily available with them. At times the borrower may also have to provide a copy of the home loan sanction letter to the project developer with whom they intend to buy a property.
  • Before you apply for a home loan, make sure that you check your home loan eligibility. This will reduce the rejection chances of your home loan application. You can easily check home loan eligibility online with the help of an online home loan eligibility calculator.
  • Apart from your loan eligibility, you must also calculate your home loan EMI beforehand. This will give you an estimate of your monthly instalment and allow you plan your monthly budget wisely. Having an estimate of your EMI will help you repay the loan amount within the stipulated time period. You can easily check your home loan EMI with the help of an online home loan EMI calculator.

It is to be noted that financial institutions charge a processing fee to get the sanction letter ready. More often than not, the processing fee is not refunded to the home loan applicant even if the loan is not approved in the later stage. Therefore, it is always advisable to settle for a financial institution with minimum processing fee on home loans. Bajaj Finserv home loan on Finserv MARKETS has a low processing fee and no hidden charges. Moreover, the Bajaj Finserv home loan offers the most competitive interest rates. This can decrease the overall cost of borrowing, thereby reducing the home loan repayment burden. Instant approval and quick disbursal of the loan amount within 24 hours are some of the other advantages of Bajaj Finserv home loans.

Lastly,do not forget to read the terms and conditions of your home loan agreement carefully before signing it.

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You can also read about tips for making down payment for home loan.

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522