An official letter informing borrowers that their loan has been approved is called a home loan sanction letter. After confirming the house loan applicant's information, including credit history, income, and ability to repay the loan, the lender issues the sanction letter.
Let us take a detailed look at how to obtain a home loan sanction letter, its importance, and more.
You have to follow the lender's guidelines while applying for a house loan. Similarly, lenders stick to a few guidelines for home loan sanctions.
The first step is to fill out a home loan application accurately and send it in with the required paperwork.
Your loan application gets processed for further approval and you can contact the bank in case you have any queries regarding the process.
After receiving your application, the lender verifies information such as your income, occupation, and credit history before proceeding with the approval/sanction procedure.
Once the loan application has been verified, the lender issues a house loan sanction letter with the terms and conditions and basic loan information like the amount, tenure, interest rate, etc.
The sanction letter cannot be considered the final loan arrangement. It just confirms the initial approval. To proceed with loan disbursement, you must provide your acceptance and meet the requirements outlined in the sanction letter.
A home loan sanction letter is sometimes referred to as a pre-approval letter or loan approval letter. It is a letter that a lender sends to a borrower certifying that the borrower satisfies the requirements to get a home loan.
This letter is the lender's official declaration that subject to specific requirements, they are willing to give the borrower a certain sum to buy a house.
A home loan sanction letter serves as the buyer's guarantee to the seller that they have the funds to acquire the property. The fact that the buyer has already obtained financing for the purchase offers the seller assurance that everything will go according to plan.
A sanction letter also shows the buyer's commitment and preparation to move forward with the purchase, which aids them during the negotiating process.
While it may vary depending on the lender, most home loan sanction letters consist of the following.
Borrower and Lender Details
Loan Amount and Processing Fees
Interest Rate
Loan Tenure
Estimated Monthly Installment (EMI)
Validity Period
Terms and Conditions
You need the following documents for a home loan sanction letter.
Proof of identity - Aadhaar card, Voter ID card, Passport
Documents for KYC verification - Aadhaar card, Voter ID card, Passport, driving license
Proof of employment
Income proof - Bank statements or salary slips
Tax returns
Depending on your lender, the document requirements may change.
Only once the lending bank has approved the loan and issued the sanction letter can the borrower finalize the purchase of the property and deposit the down payment. The majority of banks follow the below procedure:
The first stage is an eligibility check conducted by banks or housing finance organizations. A borrower's income, income stability, CIBIL score, debt history, and other variables all have a role in their eligibility.
The lender verifies property paperwork to ensure the borrower's validity. Additionally, the bank will examine the borrower's capacity to make margin payments.
Before sanctions take effect, the borrower must give the lender basic documentation such as photos, identity documents, proof of residence, income statements, tax returns, property sale deeds, six months of loan statements, and more.
A sanction letter will be sent based on these. Every Sanction letter includes loan-related information such as the final amount, repayment duration, interest rate, manner of collecting interest, floating or fixed interest rate, fine letter validity, and so on.
The lender stamps and signs the sanction letter to indicate that the loan has been approved and is available for disbursement to the borrower.
The significance of a home loan sanction letter cannot be emphasized. Here are a few main reasons why it is extremely important on your journey:
It is an official confirmation of your home loan approval and the loan amount applied, or any other updated amount based on your profile information.
This letter will include all the crucial facts, such as the final loan amount, the interest rate on home loans, whether fixed or floating, the payback period, and the home loan EMIs. It adds clarity and transparency to your overall financial plan.
With the sanction letter, you can negotiate better terms with other lenders, should you locate a more competitive offer.
The sanction letter comes before the final loan arrangement and eventual disbursement of funds.
When you receive your home loan sanction letter, read the terms and conditions carefully. If you are satisfied with the offer, you must provide a signed copy to your lender indicating your acceptance of the offer.
You must notify the lender of your acceptance decision within a specified time frame so that they can begin the disbursement process.
Click to Get Tailored Home Loans
Was this information useful?