Home Loan Sanction Letter And Its Importance

By BankBazaar | March 9, 2018

Here’s all you need to know about Home Loan sanction letter and its importance.

To ensure that you get the whole process of applying for a Home Loan right, you need to take care of everything right from filling up the application to the final disbursement. Obtaining the Home Loan sanction letter from the financing agency is an indispensable part of this process. The lender undertakes a tedious process of scrutinising all documents submitted by the applicant and ensures that all aspects involved in the loan application are valid before sending the letter of sanction to the applicant. A first-time Home Loan applicant must understand the various features and content of this sanction letter before signing the loan agreement with the housing finance company or bank.

Additional Reading: Tips To Manage Your Home Loan

The Sanction Letter

The sanction letter is signed by the concerned authority to inform the applicant that they have been found suitable for a Home Loan, and the same shall be approved subject to fulfilling the remaining formalities as prescribed by the lender.

The sanction letter is based on the findings of the lender after examining the following aspects:

  • Credit history of the applicant
  • Current income of the applicant
  • Repayment capacity of the applicant
  • Correctness of all personal documents submitted by the applicant.
  • Legal validity of the property being purchased through the Home Loan applied for.
  • The current and anticipated market value of the property which will be mortgaged to the bank as security.

In most cases, the banks charge a processing fee for all the efforts that they put in to get the sanction letter ready. Note that most often this processing fee is not refunded even if the loan is not approved.

Contents Of The Sanction Letter

The sanction letter stating the lender’s readiness to proceed with the Home Loan will have the following details:

  • The total amount of loan sanctioned
  • The tenure for repayment of the loan
  • The type of interest applicable on that loan (fixed, floating or hybrid)
  • The actual rate of interest that is prevailing and applicable at the time of disbursement of the loan
  • The base rate at which the interest is being calculated
  • The EMI and pre EMI amounts wherever applicable
  • The period of validity of the sanction letter
  • The detailed terms and conditions that the lender desires to incorporate in the Home Loan agreement

The format of a Home Loan sanction letter might slightly vary from bank to bank. Therefore, it’s essential to speak to the concerned Customer Relationship Officer before signing loan documents.

Validity Of The Sanction Letter

The borrower must remember that the sanction letter in itself is not a legal approval of the loan and they still have to submit further documents and sign the loan agreement before the loan disbursal. The typical validity of a sanction letter is about six months and if the loan is not availed during this time, the sanction shall lapse and the whole process will have to be redone.

To ensure faster processing of the loan application, the applicant must keep all the required documents ready for further processing. This way, the process can be completed at the earliest. At times the applicant may also have to give a copy of the sanction letter to the developer of the project where they intend to purchase a house.

Additional Reading: Buying A House? 5 Things To Keep In Mind While Arranging For A Down Payment

Planning to move into the house of your dreams? Check out our Home Loan offers and make that dream a reality!

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Category: Home Loans

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14 thoughts on “Home Loan Sanction Letter And Its Importance

  1. RajanChauhan

    Very Informative Article!!

    The bank will give you the sanction letter only after examining all the documents.

    You should always remember that a sanction letter is not a legal approval of the loan. The customer has to submit more documents and sign the loan agreement before the amount can be disbursed into his/her account. The validity of a sanction letter is usually in between 3-6 months.

    Reply
    1. Team BankBazaar

      Hi RajanChauhan,

      Yes, you’re absolutely right. Thanks for your comment. Have a nice day!

      Cheers,
      Team BankBazaar

      Reply
    1. Team BankBazaar

      Hi sanjay,

      Please check with your bank regarding this. There might be some charges, depending on who you’re banking with.

      Cheers,
      Team BankBazaar

      Reply
  2. RajanChauhan

    Great Article!!!

    I would like to emphasize on one point that a sanction letter is not a legal approval of your loan. A potential loan borrower has to submit more documents. Also sign the loan agreement before loan disbursement. Generally, a sanction letter is valid only for six months from the date of issue.

    Reply
    1. Team BankBazaar

      Hi RajanChauhan, Thanks for sharing this with us. Cheers, Team BankBazaar

      Reply
  3. M Muthu

    Hi, I was not given the sanction letter by the bank but was told orally that loan has been sanctioned and for further processing, I need to sign the loan agreement.

    Reply
    1. Team BankBazaar

      Hi Muthu, You can ask your bank for a sanction letter and they will give it to you. Cheers, Team BankBazaar

      Reply
    1. Team BankBazaar

      Hi Vishal,

      Thanks for stopping by. Yes, the offer letter is also called the sanction letter. It is a formal confirmation letter issued by the lender after scrutinising all documents submitted by the applicant.
      The letter is signed by the concerned lender to inform the applicant he/she has been found suitable for a Home Loan, and the same shall be approved once the applicant fulfils the remaining formalities prescribed by the lender.
      Sanction letters contain information about the loan agreement, such as the total amount to be sanctioned, the interest rate and base rate on which it has been calculated, whether the rate is fixed/floating, and the tenor of the loan.
      It is valid for 6 months, and in the event that you do not receive a loan in these 6 months, the whole procedure must be gone over from start.

      Cheers,
      Team BankBazaar

      Reply
  4. MAHESH DAN CHARAN

    I HAVE BEEN TAKEN HOME LOAN FROM LIC HOUSING FINANCE LIMITED. I HAVE BEEN LOST SANCTION LETTER. I REQUEST FROM LIC HFL TO GIVE ME AUTHENTIC COPY OF SANCTION BUT THEY REFUSE TO GIVE ME SANCTION LETTER. WHAT CAN I DO NOW. I AM HELPLESS .PLEASE GIVE SUGGETION TO ME

    Reply
    1. Team BankBazaar

      Hi Mahesh,

      You may need to file a General Diary at the nearest police station for this and furnish it to the bank for them to issue a duplicate to you. Please get in touch with your bank to understand the requirements better.

      Cheers,
      Team BankBazaar

      Reply

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