What is Home Loan Sanction Letter and Why is it So Important?

Have you ever wondered why a home loan sanction loan letter is as crucial as the keys to your dream home? A home loan sanction letter is a kind of document issued by a lender to a borrower, indicating that they are eligible for a home loan. It confirms the loan amount, interest rate, repayment terms, and other conditions of the loan. In this blog, you’ll learn why completing the home-buying process and securing a loan is essential. 

Loan Sanction Meaning and Importance

Loan sanction refers to the approval or acceptance of a loan application by a lender, indicating that the borrower is eligible for the loan amount. It formally confirms the loan terms, including the loan amount, interest rate, tenure, and other conditions. It provides borrowers with financial clarity on their commitments and repayment obligations. Also, it builds trust between the borrower and lender, ensuring a smooth loan process. 

What is a Sanction Letter?

As mentioned, before the final loan disbursement, the lender must ensure that certain parameters are met and everything is in order. To inform the borrower that they are approved for the home loan, the lender issues a sanction letter to the borrower. The bank will set up repayment terms for your home loan based on certain factors like creditworthiness, debt history, age, etc. The sanction letter will contain the terms and conditions the bank has decided on for the loan and the basic information about the borrower. 

The letter indicates that the home loan application has been successful. Subsequently, the loan will be approved upon successful completion of the paperwork, evaluation formalities, and other conditions.

A Home loan sanction letter may have the following information:

• Loan Amount Sanctioned
• Repayment Tenure
• Validity for loan Sanction
• Mode of repayment
• The applicable home loan rate of interest
• Type of interest rate, whether Fixed, Variable, or Hybrid
• Particular scheme (if applicable)
• Home loan tax benefits
• Terms and conditions of your home loan

Based on the information provided by the borrower during the application and verification process, the bank decides an in-principle loan amount to be disbursed upon approval. This letter is known as the in-principle sanction letter. A usual, in principle, sanction letter format will contain details about the bank loan sanction letter along with the terms and conditions agreed by the bank. 

A Home Loan Sanction Letter is based on eligibility. A general loan Sanction letter format will also provide the validity for the loan disbursement. If the borrower decides to proceed with the loan, they can carry out the process within the specified validity on the home loan sanction letter. 

What Is the Process of Home Loan Sanction?

The Home Loan system can be widely classified into 3 dimensions: application, sanction and disbursement. While application and disbursement are quite systematic with paperwork and formalities in place, the process of receiving bank loan sanction letters is not very organised and depends on certain factors. Some of the factors that may affect your eligibility for a home loan sanction are:

Age Matters:

Age is an essential factor for any home loan sanction process. The younger you are, the better the terms are for a Home Loan. Similarly, if you are closer to getting retired, finding a lender to sanction your home loan may prove difficult.

Profession and Income:

Borrowers with unconventional or irregular employment statuses find it challenging to approve a loan. This is because the lender considers the profession and income of the borrower as an essential factor for loan repayment capability. Irregular or risky employment may have a negative impact, whereas a steady source of income can improve your chances of getting a sanction letter for a loan exponentially.

Age of Property ana Value:

If you are taking a loan against a property, the lender will evaluate its value before the approval. If the property is old, it's valued less. After considering other legal and technical factors, the lender will run checks to account for structural collapse and give a rough valuation. 

Credit Score:

A good credit score implies a better ability to repay. Lenders prefer borrowers with a good credit history and sufficient creditworthiness. Your loan may be denied based on your credit history.

Dependents: 

The number of dependents/co-applicants, e.g. spouses, children, or parents, will also be considered before the lender sanctions your loan. A higher number of dependents may lead to less disposable income, and hence, the lender may decline your Home Loan application based on repayment capabilities. 

These are some of the factors that may affect your eligibility for a bank loan sanction letter. After applying for the home loan, the lender’s team will verify all the details you provided. Based on the factors discussed above, the lender will determine your eligibility during this process. Upon successful verification by the lender’s team, the lender will inform the buyer if they are eligible for the home loan through the sanction letter. If rejected, the borrower can improve upon the factors mentioned and apply again after some time. 

Importance Of Home Loan Sanction Letter

Now that you know what a typical sanction letter contains, let’s walk through what makes a home loan sanction letter so crucial during your search for the perfect home loan. It is essential to go through the sanction letter in detail. There is a lot of vital information in the fine print, and you may get confused if you are not an expert. 

A sanction letter contains essential terms related to the repayment of a loan, including details about processing fees, late payment charges, etc. After approval, you can compare sanction letters from different institutions and choose the most favourable terms tailored to your requirements. If you have any problem understanding the content of your sanction letter, reach out to your lender or any financial expert immediately and get your queries cleared. 

Usually, most banks have similar sanction letters for home loans with little difference in terms and conditions. You can take a look at the format of the sanction letter of home loan for leading banks here:

Key Details in a Sanction Letter 

A sanction letter is a document sent to a borrower by a bank or lending institution saying that the house loan has been approved. It lays forth the terms and conditions under which the loan will be granted.

The loan sanction letter contains important information such as:

• Amount of the mortgage.
• The interest rate is in effect (fixed or floating).
• The interest calculation's starting point.
• The repayment period for a loan.
• Repayment method for loans.
• Payment information for EMIs and pre-EMIs.
• The loan sanction letter's validity.
• Benefits from taxation.
• A unique plan (if applicable).

Request for the Loan Sanction Letter

House loan approval takes a long time. It begins when the applicant completes the loan application and attaches all required documents. The applicant's paperwork and other financial facts are then verified by the bank or housing financing company (HFC). Banks also use credit bureaus to analyse the creditworthiness of borrowers and the value of assets. If the lender is satisfied, it issues a sanction letter confirming the loan's approval.

The approval process for a house loan can usually take three to four weeks. However, if there is a lack of information or insufficient document verification, there may be a delay. For these specific reasons, the loan may potentially be put on hold. The sanctioned amount set by the SBI loan sanction letter or the HDFC loan sanction letter validity all follows RBI instructions. 

What is a Digital Sanction letter?

Many banks and lending businesses now offer digital options for applying for an e-home loan and receiving a digital home loan sanction letter, simplifying the house loan application procedure. Getting a house loan sanction letter from a housing finance company or a top bank, such as SBI or HDFC, is a simple process. You can also check the status of your home loan application online.

As the name implies, a digital sanction letter is a digital version of the house loan approval paperwork sent by the bank/lender prior to sending the final home loan agreement.

What happens after you receive the loan sanction letter?

The bank/lender delivers a certified offer letter with vital facts about the house loan after receiving the home loan sanction letter. The applicant must sign and submit an acceptance copy to the financial institution. As a result, this is the time to double-check the information in the penalty letter and make sure you understand the terms and circumstances.

Home Loan Sanction Letter Format for Different Banks

One of the first steps in the home loan procedure should be to learn the format of the sanction letter. Depending on the lender, the approval loan sanction letter format may differ. Let's look at an example of a house loan sanction letter.

1. HDFC Bank Loan Sanction Letter

Receiving a loan sanction letter from HDFC Bank is a significant step towards securing the desired loan. Borrowers should carefully read the terms and conditions, ensure timely acceptance, and complete the formalities to avail of the loan within the specified validity period. 

HDFC Bank Loan Sanction Letter Format

2. Axis Bank Loan Sanction Letter 

Axis bank loan sanction letter is approved after a thorough evaluation of the borrower’s creditworthiness, documentation, and verification. It specifies loan terms, including amount, interest rate, and tenure. 

Axis Bank Sanction Letter Format

3. LIC Housing Finance Loan Sanction Letter 

The LIC Housing Finance is a formal document that marks the approval of your housing loan application. It’s a significant milestone in owning your dream home, and it outlines the terms and conditions of your loan. 

LIC Housing Finance Sanction Letter Format

4. SBI Bank Loan Sanction Letter

The SBI bank loan marks the approval of a home loan application, empowering you to achieve your financial goals. SBI bank provides loans with low processing and no hidden charges. You can check your home loan eligibility through the YONO app. 

SBI Sanction Letter Format

Home Loan Sanction Letter Charges

The charges associated with a home loan sanction letter vary depending on the lender and loan terms. These charges are indicative and may vary depending on the loan amount and borrower’s profile. 

Bank	Charges
HDFC	₹500 - ₹2000
SBI	₹500 - ₹2000
LIC Housing Finance	₹500 - ₹2000
Axis Bank	₹500 - ₹2000

Home Loan Sanction Letter Validity 

Usually, a Home loan sanction letter is valid for six months, during which the borrower can submit their documents along with the acceptance copy of the home loan sanction letter. It is very important to keep in mind that if the validity is over, you will have to repeat the entire procedure of the home loan application for a sanction letter and prove your eligibility as well. You can also check the validity of your home loan sanction over the lender’s website. Here is the validity period of some of India’s leading banking institutes:

Name of the Lender	Validity of Sanction Letter
HDFC Bank Sanction Letter Validity	6 months
SBI Sanction Letter Validity	6 months
ICICI Bank Sanction Letter Validity	6 months
Axis Bank Sanction Letter Validity	6 months
LIC Home Loan Sanction Letter Validity	6 months

Documents Required for the Home Loan Sanction Letter

Verifying documents is an important step for your lender as it is the only way to determine the borrower’s repayment capabilities. The lender wants to know its borrowers better and needs the following documents:

• To identify your financial records
• To verify your credit score
• To know your nationality and age
• To know your monthly income

The type of documentation required by the lenders are:

• Proof of identity- The accepted documents are the Aadhaar card, PAN Card, Driving License, Voter ID card, and Passport of the borrower.
• Address Proof- Aadhaar Card, PAN Card, and utility bills for the property for the last three months have been accepted.
• Income proof- Salary slip, ITR, or Form 16 (if applicable) is accepted
• Property Documents: As per requirement.

The requested documents may differ based on your type of employment. Here are the documents you must submit to some of the top lenders to proceed with your Home Loan Sanction Letter.

1. Documents Required by HDFC Bank

• For Salaried Individuals
  • Proof of both Identity and Residence (KYC)
  • Proof of income
  • Property related documents
  • Other Documents for Home Loan

2. Documents Required By SBI

• For all applicants:
  • Employment Proof
  • Property Documents
  • Loan Application
  • Identity Proof
  • Proof of Residence

3. Documents Required by ICICI Bank

• Documents Required from Salaried Individuals
  • Latest Income tax return form
  • Employment letter
  • Past three months’ salary slips
  • The past six months’ bank statements

4. Documents Required by Axis Bank

• Employment Proof
• Property Documents
• Loan Application
• Identity Proof
• Proof of Residence
• Signature Proof

5. Documents Required by LIC Home Loan Sanctioning Authority

• Duly filled in home loan application form
• Proof of Identity: Aadhaar Card, PAN Card, Voter’s ID Card or Passport 
• Proof of Residence: Passport, Ration Card, Electricity Bill or Telephone Bill
• Bank Passbook or bank account statements from last two years
• Power of Attorney, wherever applicable 

After receiving a sanction letter, it is very important to read in between the details and understand the terms thoroughly. A slight misunderstanding on your part will prove to be a burden of a lifetime. So, if you have any queries related to your home loan sanction letter, get in touch with your lender and get your queries cleared.

How Is a Sanction Letter Different From In-Principle Approval and Disbursement Letter?

A sanction letter of loan, also known as a sanction letter for a home loan, is a crucial document you receive from your lender after the loan application is approved. It states the loan amount approved and the terms and conditions associated with the loan. However, many home buyers often mistake the sanction letter with two other important documents in the loan process, which are the in-principle approval and disbursement letter. Let's dive into what makes each of these letters unique.

In-Principle Approval Letter

In-principle approval is the first step in the loan process, where the lender agrees to lend you the desired loan amount. It's like a pre-approval for your loan application and gives you an idea of the loan amount you can expect to receive. The in-principle approval is valid for a specified period, after which you must reapply if you haven't yet availed the loan.

Disbursement Letter

The disbursement letter is the final document that you receive from the lender after the loan has been approved and disbursed. This letter confirms the loan amount disbursed, the interest rate, and the repayment tenure. The disbursement letter is the starting point for your loan repayment process, and you will receive regular loan statements from your lender until the loan is fully repaid.

At a glance: Difference between Sanction Letter, In-Principle Approval, and Disbursement Letter

Parameter	Sanction Letter	In-Principle Approval	Disbursement Letter
Purpose	Confirm loan approval and terms	Agree to lend in theory	Confirm loan disbursed and repayment details
Received After	Loan Approval	Loan Application	Loan Disbursed
Valid for	Till loan disbursed	Till the loan fully repaid	Till the loan is fully repaid

Procedure After Home Loan Sanction:

1. Review the sanction letter of loan carefully
2. Verify all details in the sanction letter, including loan amount, interest rate, and repayment tenure
3. Sign and submit the sanction letter to your lender
4. Prepare all the required documents for disbursal
5. Receive the disbursement letter and begin the loan repayment process

Navigating the sea of Sanction, Approval, and Disbursement Letters with NoBroker

A sanction letter of loan is a crucial document that you receive after the loan application is approved, and it confirms the loan amount approved and the terms and conditions associated with the loan. In-principle approval is the first step in the loan process where the lender agrees to lend you the desired loan amount in theory, and the disbursement letter confirms the loan amount disbursed, the interest rate, and the repayment tenure. NoBroker offers real estate and home loan services to help you find the best loan option for your home buying journey. So, if you're looking for a hassle-free home loan process, look no further than NoBroker!

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