Importance of Home Loan Sanction Letter


When you apply for a home loan, you need to follow certain steps in order to obtain the loan amount. After confirming your eligibility for a home loan, the lending institutions ask you to submit specific documents confirming your identity, address, and income. You also have to submit the property papers to complete the documentation process. Completing all these steps by submitting accurate documents is crucial because lenders check everything thoroughly.

Once, lending institutions confirm the accuracy of all documents, they hand you over the home loan sanction letter confirming the approval of your application. Getting this letter does not mean that you will get the loan amount in your bank account straight away. This letter is very important for home loan disbursement.

Home loan sanction letter is a documental proof that the lending organization has confirmed your eligibility to get a loan by processing your loan application. Your income is one of the most influencing factors on your eligibility to get a loan. The lenders offer interest rate and tenure based on that. So, when all the factors are satisfactory according to the guidelines of the lending institution, they offer you the exact amount requested by agreeing all the terms you offered. However, if they find several factors negatively affecting your loan repaying capacities (say, age, other loans, etc.), then they adjust the terms accordingly.

The finalized terms are clearly mentioned in your home loan sanctioning letter, therefore, you must read it carefully. In order to avoid issues while repaying the loan, you need to understand all the terms and conditions mentioned in the home loan sanctioning letter. The content of the letter also contains the following things,

  • The total loan amount approved by the lending organization
  • Home loan interest rate and base rate used to calculate it
  • Type of interest rate chosen by your i.e. either floating interest rate or fixed interest rate
  • Total loan repayment period i.e. tenor
  • Individual terms (vary person to person)

Though sanction letter is proof that the lending institution has approved your loan application, it is still not considered as legal proof. The lending organizations can still run a background check and ask you to provide additional documents before making the final agreement.


In other words, a home loan sanction letter is like an offer made by the lending institutions. You have to accept all the terms and conditions mentioned in till the letter is valid. Home loan sanction has validity, which is generally around six months. After the sanction letter is expired, you cannot accept the offer and may have to repeat the application process.

As the home loan sanction letter is proof that your loan application is approved, you are required to submit it to the property developer to finalize the purchase. A Home loan sanction letter is a crucial part of home loan documentation process. In order to avoid any issues in the future, you must read it carefully before submitting.