Insider’s guide: Home loan sanction letter essentials

A home loan sanction letter confirms the issuance of a housing loan to a borrower. Lenders provide this document to a loan applicant when they are confident regarding their repayment ability. 

On analysing the paper, one would notice several details and benefits attached to the particular loan offer. Consider reading further to know in detail. 

What are the details mentioned in a home loan sanction letter?

Financial institutions issue a home loan sanction letter to ascertain a person’s eligibility to borrow the requested sum. In this document, one can find the following details:

• The principal or amount borrowed
• Housing loan interest rate
• Interest type (fixed or floating)
• Mode of repayment
• Loan tenor
• Base rate of the housing loan
• Validity of the document
• EMI amount
• Terms and conditions
• Special benefits (this information may vary from one lender to another)

It is crucial to have a brief idea of the home loan sanction letter format. This way, one can easily cross-check the information without getting distracted. 

What are the documents required for a home loan sanction letter?

Getting the sanction letter is a preliminary step of home loan approval. Thus, the requisite documents are the same when compared to the list presented while applying for a home loan. 

These include:

• Address proof: Passport, voter ID card, utility bills like electricity bill, internet bill, etc. 
• Identity proof: Aadhaar card, PAN card, passport, voter ID card, driving licence
• Property documents: Occupancy certificate along with utility bills and property tax receipts or letter of allotment
• Proof of income: bank account statement for the past 6 months, salary slip (for previous 3-6 months) or ITR for the last 2-3 years

From time to time, lenders keep on updating their specific list of documents. Thus, they may ask the borrower to submit some additional documents apart from the ones discussed above. 

Why is the loan sanction letter important?

A couple of factors stress the importance of a loan sanction letter, such as:

• It acts as a legal contract between a lender and a borrower

In case there arises any discrepancy during the repayment period, the borrower can utilise this document to challenge their lender. Basically, it is an agreement that ensures all the involved parties stick to the predetermined conditions throughout the loan tenor. 

• It helps to revisit and improvise loan decisions

When an NBFC or bank forwards a home loan sanction letter, the applicant can take a final look before accepting the loan deal. Meanwhile, they can assess all their current financial obligations and income potential before arriving at a well-informed decision. 

In several cases, the monthly instalments can be comparatively higher than the amount returned by the lender’s online housing loan EMI calculator. Under such circumstances, one can reconsider accepting the offer. 

Where to get a home loan sanction letter?

One needs to apply for home loan on a bank or NBFC’s official website or branch to get approval and the sanction letter. Many lenders offer loans with attractive terms to attract customers. 

Also, several lenders extend pre-approved loans to their existing customers depending on their credibility. These offers are usually applicable to products like loans against property, home loans, etc. Interested individuals can enter their name and other details on a lender’s website to check their eligibility for a pre-approved offer.

Whether one should select a bank or NBFC as their housing loan partner, again depends on their priorities. 

For instance, here are a few benefits of selecting an NBFC over a bank:

• The disbursement process is much faster
• Loan terms are more flexible 
• Interest rates levied are relatively lesser
• 24/7 customer support is available

It is comparatively easier to fulfil the loan eligibility criteria put forward by most renowned NBFCs across India. 

Regardless of all these advantages, some people still rely on banks when it comes to home loans. It is mainly because banks provide them with a greater sense of reliability. This is an important factor when the loan amount is huge and the repayment period is long.

Irrespective of the lender one selects, it is crucial to keep the home loan sanction letter handy. Nowadays, digital formats have been introduced so that potential homebuyers can track the necessary resources with minimum paperwork.