The application and availing of a home loan is a long process that requires filling out a lot of paperwork. A crucial part of this process is the home loan sanction letter which lending institutions issue to inform borrowers about their eligibility for a loan.
Read on to find out everything about the sanction letter and its other vital aspects.
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5 key points about a home loan sanction letter
Here are 5 important things to know about the sanction letter of a housing loan:
- Lending institutions send this before the final loan agreement.
- Borrowers need to submit the required documents and verification paperwork to get a home loan sanction letter.
- A sanction letter informs an individual about the interest rate and loan tenor along with the loan amount they are eligible for.
- Lenders scrutinise a person’s income, credit score, and credit repayment history before sending a sanction letter.
- A lending institution issues a sanction letter only after verifying a borrower’s credentials and eligibility for a housing loan.
Certain things dictate whether or not an applicant receives a sanction letter.
Eligibility for a home loan sanction letter
The following are the eligibility criteria for receiving a digital sanction letter for a housing loan:
- Nationality- Indian
- Age- 23-62 years for salaried individuals and 25-70 years for self-employed individuals.
- Employment status- 3 years of work experience for salaried applicants and business holding of 5 years for self-employed borrowers.
- Credit score- 750 and above.
Moreover, this letter has a sanctioned limit section.
Sanctioned limit in a home loan sanction letter
The sanctioned limit mentioned varies for different applicants and depends on certain factors, such as-
- Down payment on the loan
- Market value of the house to be purchased
- Overall eligibility of an applicant
If a candidate meets these criteria, they can apply for a housing loan by providing the required documents.
Documents required for a sanction letter
Borrowers can avail of the sanction letter by providing the following documents-
- KYC documents- Voter ID, Aadhaar card, passport, driving license (any one)
- Last 2 months’ salary slips
- Employee ID card
- Last 3 months’ bank statements
The interest rate on a home loan plays an important role and determines whether individuals find it feasible to apply for the loan.
Home loan interest rate
Lending institutions offer 2 types of interest on home loans:
- Fixed-rate of interest
The rate remains the same throughout the tenor of the loan in a fixed-interest type loan. Availing of a loan at fixed interest rates allows borrowers to pre-plan the repayment and efficiently manage additional expenses.
- Floating rate of interest
Floating interest rates change throughout the tenor of a housing loan, unlike fixed interest rates. The rate of interest can increase or decrease depending on the benchmark rate of home loans.
This type of interest is a suitable option when market trends indicate decreasing interest rates.
Factors affecting home loan interest rates
The following are certain things that determine lower interest rates on a home loan-
- Benchmark rate of lending
- Type of interest
- Loan-to-value (LTV) ratio
- Location and condition of the property
- Repayment tenor
- Financial profile of a borrower
Borrowers can also check their home loan eligibility and know interest amounts and EMI etc. prior to applying for a loan.
Home loan eligibility calculator
Since applicants can only get a sanction letter when they are eligible for a housing loan, it is advisable to check it beforehand.
Various lenders provide a tool on their online portal that accurately checks the home loan eligibility criteria for salaried as well as self-employed individuals.
By checking their eligibility, suitable candidates can avail of pre-approved loan offers from different loan providers. These offers facilitate the smooth processing of a loan application. Borrowers can check their pre-approved offers by entering names and other details on the lender’s website.
Apart from that, applicants can also use a home loan EMI calculator that displays the monthly EMIs and principal, and overall interest amount of the loan. These tools are free and easy to use.
Obtaining a home loan sanction letter is only the first step in getting a loan. Borrowers can make sure that they go through the details in the letter carefully to know their loan eligibility and improve it if possible.
