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Loan Sanction Letter and Its Importance

Loan Sanction Letter and Its Importance

A millennial house seeker has to undergo many complex processes while buying a house. Someone wishing to apply for a home loan must understand a few things. You must understand the application process, loan sanction, and disbursal process.

Welcome to this post, where you will discover details on the loan sanction process. You can also read to learn about its importance and steps to follow.

What Exactly is a 'Loan Sanction Letter'?

Want to understand the loan sanction letter and its importance? A loan sanction letter gives the borrower official confirmation. It indicates that the lender has approved the loan.

The following are the reasons why a loan sanction letter is important:

Get Better Deals –

The house seeker can use the loan sanction letter to find out the loan amount a lender may offer. This letter highlights your financial status.

Take one step further to Buying Your Dream Home –

With a sanction letter, a borrower can prepare for their loan repayment. This letter indicates the total amount of approved loans, interest rates, and repayment periods. A prospective house owner can get all the terms and conditions mentioned in this letter.

More Benefits –

A borrower can get a loan from the lender seamlessly. Since the sanction letter gives the specific term of your loan, you won't have any misconceptions when considering the amount or eligibility. It offers transparency between the borrower and lender.

With a sanction letter, you can understand the terms and conditions of the loan process. So, it ensures the process is seamless for both borrowers and lenders.

Things Included in the Loan Sanction Letter

A personal loan sanction document might differ from one lender to another. However, the letter will include these things:

  • The type of loan
  • The personal loan application number
  • The amount of sanctioned loan
  • The borrower's residential address
  • Total loan tenure accepted by the lender
  • Interest rate
  • Base rate as per the calculation
  • Floating or fixed interest (considering the type)
  • Processing charges
  • EMI amount

Your lender may consider the validity of your sanction letter and the circumstances under which it might get cancelled. In addition, it may include details of the loan application process.

Applying for the Home Loan Sanction Letter – Steps to Follow

So, you have learned the meaning of a home loan sanction letter and its importance. Now, here are the steps involved in a home loan sanction process:

Step 1: Applying for the Loan on the Internet

Firstly, you must go to your lender's official website. There, you need to apply for a home loan. You must choose the option and fill out the form. The loan application form needs to include your details and other information based on your income, employment, tenure of loan, loan amount, etc.

Ensure that you double-check the details you include before submitting them. Your loan eligibility is determined based on the documents. You need to give your phone number where the OTP will be sent. You must enter the number to follow the second step.

Step 2: Assess Your Loan Amount

If you proceed with the online process, your eligibility will be assessed based on the details you provide. You might check for the maximum loan amount. Note that you need to pay monthly EMIs depending on these parameters:

  • Loan amount
  • Tenure
  • Rate of interest

Here, you will get an option to include a co-applicant. This will improve your loan eligibility. You might need to fill out a form separately once you add the name of a co-applicant.

Step 3: Wait for the Provisional Approval

The lender may ask for login charges online for provisional approval. Your login charge consists of your credit charges and processing fee. The provisional approval for the loan sanction letter is sent via email.

Step 4: Include the Important Documents

Now, the lender may ask you to upload your documents. You may need the following documents:

  • ID proof like passport, PAN card and Aadhaar card
  • Your passport-sized photos
  • Residential proof
  • Six months of bank statements
  • Three months of pay slip
  • Most current ITR form
  • Your property documents

Step 5: Receive the Loan Sanction Letter

After you upload your documents, your lender initiates the process. If everything goes according to the process, your loan gets approved. You will then receive the loan sanction letter. The letter includes details like the following:

  • Rate of Interest
  • Loan Amount
  • EMI Details
  • Loan Tenure
  • Terms and conditions
  • Any other charges

Step 6: Sign in and Send it Back to Your Lender

If you accept all the terms and conditions, sign and resend those documents to your lender. After the lender receives the signed documents, your lender might ask for these documents:

  • Title deed
  • Encumbrance certificate
  • No Objection Certificate (NOC) and more

As soon as the process is complete, your lender verifies them and ensures everything goes according to the process.

Step 7: Loan Amount Gets Disbursed

The last step involves your lender disbursing the loan amount via a cheque or demand draft. According to mutual agreement, your disbursal might occur in certain parts of the amount or a lump sum.

Is a Sanction Letter Different from a Disbursement letter or In-Principal Approval?

Suppose a lender evaluates your financial status and offers an approval letter with a loan guarantee. This process is the in-principle approval. Lenders might provide such a letter for a pre-approved housing loan. They may charge a specific fee as per the processing charges.

Here, the validity might range between three and six months. On the contrary, a disbursement letter includes the loan amount the lender pays. It might include details, considering the loan insurance amount.

However, a home loan sanction letter is one such document that indicates a house seeker's eligibility for a loan amount. The terms included in the letter remain valid till the specified date mentioned in the letter. A lender or lending company might offer or change the terms based on your loan eligibility. It might not be considered a legal process to apply for a loan.

However, after the letter gets accepted by an applicant, the lender may check the real estate papers submitted by the applicant. A lender keeps those documents until the applicant repays the amount.

Once you receive the loan sanction document, the lender or bank sends the certified offer, including the details. The applicant must sign and submit each document to the lending institute or bank.

Amidst the digital revolution in the property market, the online housing loan application process is seamless. Various lending companies and banks have offered a digital process for applicants to apply for loans online. You can get a digital housing loan sanction letter to assess the application status.

Wrapping up

Finally, one should remember that a home loan sanction is a significant document. However, it's not the final loan approval letter before the amount gets legally approved. An applicant must undergo various verification levels and background screening before the final loan agreement gets drafted.

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