A home loan is one of the most significant financial and emotional commitments one makes in an entire lifetime. A home loan comes with a significant financial implication as well as the home loan application journey involves a few critical documents too. To be better prepared for the loan journey, a home loan applicant needs to be well aware of the significance, content, and implications of all home loan documents.
What is a Home Loan Sanction Letter?
A home loan sanction letter is considered one of the most significant ones out of the pile of all home loan documents. As the name suggests itself, a home loan sanction letter is an official declaration from a lender that they have agreed to sanction your loan on mutually agreed terms and conditions.
So, what role does a home loan sanction letter play in the entire home loan process? And what all do you need to know about the letter? Let’s take a look.
5 Important Things you Need to Know About a Housing Loan Sanction Letter
1. A Home Loan Sanction Letter is Not a Loan Agreement
If, for example, you get a PNB Housing home loan sanction letter, it does not mean that you have been allotted the loan amount. A loan sanction letter is merely a document from the lender that states that your loan request is approved. It is issued after completing the home loan sanction process and before the final loan agreement is provided. So, how does the letter help you?
Think of it as an offer letter you get before joining an organisation. The home loan sanction letter acts as proof of meeting the lender’s loan eligibility and contains crucial components like home loan amount sanctioned, rate of interest, loan repayment tenure, estimated EMI, and more. Once you receive the home loan sanction letter, it guarantees that your loan amount is approved, but the loan disbursal is yet to happen.
2. It Has Multiple Details Included
So, what does a home loan sanction letter comprise of? In a nutshell, it is a breakdown of all the vital details of the loan agreement that your lender is offering you. The essential components of a home loan sanction letter include:
- total sanctioned home loan amount
- loan repayment tenure
- home loan interest rate provided
- mode of loan repayment
- the validity of the letter
- EMI details, etc.
- Other crucial terms and conditions
You can double-check the EMI stated in the letter with the home loan EMI calculator. Bear in mind that a home loan sanction letter may not give you all the terms and conditions you asked for. Hence, it is up to you whether you want to accept the terms in the letter, renegotiate them or forego them for better home loan interest rates elsewhere.
3. You Require Multiple Documents to Get a Home Loan Sanction Letter
Lenders use various home loan eligibility calculator tools and methods to process your request for a home loan before releasing the loan sanction letter. Hence, the home loan documents required from your end for the same include:
- KYC documents like PAN Card, Aadhaar Card, Driving Licence, Passport, etc.
- Bank account statements for the last 6-12 months
- Latest salary slips or Form 16 for salaried applicants
- Proof of business and Income Tax Returns for the past three years for self-employed applicants.
Note that the nature of documents required varies slightly from lender to lender. Upon submission and successful verification of the required documents and your loan application, the lender will issue a loan sanction letter for you to approve.
Must Read: How to Reduce Your Home Loan Interest Burden (4 Simple Tips)
4. Getting a Home Loan Sanction Letter Can Take 7-10 Days
A home loan sanction letter essentially signals a successful home loan application. As you might know, the approval of a home loan is subject to multiple verifications and checks; the entire process can last up to four weeks for self-employed or business owners while it takes only 7-10 days for salaried employees. The process includes verifying the KYC details, income, credit, and financial health documents. Additionally, the lender also evaluates your property’s present and appreciative value.
All these factors help the lender to finalise the terms for your loan and share them with you over 3-4 weeks in the form of a sanction letter. If you are satisfied, you can go ahead and initiate the loan disbursement process by sharing further documents. Many lenders provide a digital loan sanction letter to home loan applicants.
5. A Home Loan Sanction Letter is Valid for Six Months
If you’re wondering how long you can hold on to a home loan sanction letter before agreeing to the terms, the answer is usually six months. The validity date is often stated in the letter. Once the stipulated period expires, you will not get a home loan from the vendor on the same terms. You will have to reapply for a home loan from the beginning. Hence, it is essential to know this date and plan the rest of your home loan process accordingly.
Conclusion
A home loan sanction letter is paramount to any applicant’s dream of purchasing a home without hassles with such essential details inside. Hence, read all the details very carefully.
PNB Housing’s home loan sanction letter process is highly transparent at every step of the way. As an applicant, you can always reach out to our representatives to clarify your sanction letter terms or other queries. Visit home loan to know more.
