Home Loan

What is a Home Loan Sanction Letter?


Everybody dreams of owning a house someday. With a home loan, you can come closer to achieving your dreams. In this article, you will learn more about home loan eligibility. But first, you must know what is meant by a home loan sanction letter.

What exactly is a home loan sanction letter?

A home loan sanction letter is an initial letter of approval for your home loan. After your home loan is approved, a home loan sanction letter is given to acknowledge your home loan application. The letter is issued by banks or other institutions stating that the home loan has been approved. The home loan sanction letter is issued only after verifying your home loan eligibility. A home loan sanction letter is also called an “in principle home loan sanction letter.”

You can learn more about the home loan application process with Piramal Finance and understand the options that suit you best.

Eligibility for Getting a Home Loan

Eligibility for a home loan is based on several factors:

  • Employment: All banks or institutions provide home loans only to salaried or self-employed individuals.
  • Age: Age is the other factor that determines your home loan eligibility. If you are younger, the terms and other conditions are more favorable. If you are older or nearing retirement age, there will be fewer chances for approval. It is based on the calculation of your remaining work years.
  • Credit (CIBIL) Score: A credit score can make or break a home loan. If you have a healthy credit score, you will be in a safer position. A credit score of 700 or above is generally preferable.
  • Other Financial Obligations: The lenders will also consider other financial obligations, such as any other ongoing loans or liabilities.
  • Criminal History: Though most financial institutions do not consider your criminal history, some will take it into account before issuing a home loan

Once the bank or financial institution has verified your details, it will then determine the principal, interest rate, and repayment period of your home loan.

What are the Features of a Home Loan Sanction Letter?

Here are some of the key features of a home loan sanction letter:

  • Home Loan Sanction Letter and Loan Agreement: You should not confuse a home loan sanction letter and a final home loan agreement. They are two different documents. The home loan sanction letter indicates your eligibility for a home loan. The home loan agreement, on the other hand, states the terms and conditions that your bank or financial institution has laid down.
  • Validity: The home loan sanction letter is generally valid for up to 6 months. However, this may vary from bank to bank. 
  • Reapplication: If the validity of a home loan sanction letter expires, you do not need to worry. You can reapply for the sanction letter. However, before renewing the letter, you need to apply for the home loan again.

What Does a Home Loan Sanction Letter Contain?

The home loan sanction letter from banks and other institutions contains some important information. This includes:

  1. The total amount of the loan that you are sanctioned.
  2. The tenure of your home loan.
  3. The type of interest rate for your sanctioned home loan. The interest rate may either be fixed, floating, or a hybrid one.
  4. The tax benefits of your home loan.
  5. EMI details and related information.
  6. Mode of the home loan repayment.
  7. The validity of the home loan sanction letter.
  8. Other terms and conditions.

The contents of a home loan sanction letter mentioned above may be subject to certain changes. Thus, they are different for different financial institutions.

What are the Benefits of a Home Loan Sanction Letter?

Some advantages of a home loan sanction letter are as follows:

  • Acts as a guarantee: The home loan sanction letter guarantees your home loan eligibility, before receiving the loan amount.
  • Important Document: The home loan sanction letter is an important document that you must submit to your builder or a developer. The builder or developer is the company or individual from whom you have purchased property.
  • Gives prior information: The home loan sanction letter gives you prior information on your credit score. It also acts as a reminder of the EMI amount, helping you plan your expenses in advance.

What is a Digital Home Loan Sanction Letter?

The world has become more digital, and so has banking. As a result, banks and other institutions have made the home loan application process simpler. If a person is eligible to apply for home loan they can submit their application online. Once verified, the bank or institution will send them the sanction letter digitally. Thus, a digital home loan sanction letter can be defined as a home loan sanction letter that is received online or as a digital copy.

The Bottom Line

We hope you have understood what a home loan sanction letter is, its benefits, and home loan eligibility. The good news is that you can avail of a home loan at low-interest rates with minimal documentation from Piramal Finance. You can also check your home loan eligibility with us before applying for the same.

We, at Piramal Finance, will work with you to get a step closer to your dream house. You can also learn more about finance and related topics on our website.