What is home loan sanction letter?
Also called: sanction letter, loan approval letter, in-principle sanction, loan manjuri patra
Your lender's written approval of a home loan, stating the amount, interest rate, tenure and conditions, is the sanction letter. It isn't the loan contract; money moves only after the property is approved and you sign the loan agreement.
Banks and housing finance companies issue the sanction after checking your income, credit report and repayment capacity. At this stage they've looked at you, not the flat. The legal and technical checks on the property come next, and the bank can still decline to disburse if the title, approvals or valuation don't satisfy its panel lawyer and valuer.
Read the letter the way a lawyer reads an offer. The rate on a floating loan will be written as a benchmark plus a spread, for example the RBI repo rate of 5.25% plus 2.35%, giving 7.6%. The spread is what the bank controls, so note it; the repo part moves with RBI policy. Check the validity period (commonly three to six months), the processing fee and whether it's refundable, any insurance the bank wants bundled, and the special conditions at the end. Those often include "subject to satisfactory valuation", a requirement to bring in your own contribution first, or a co-applicant's income being counted only if that person is also a co-owner.
A pre-approved or in-principle letter, issued before you've chosen a property, carries even less weight. It's useful for knowing your budget and for showing a seller you're serious, nothing more.
If the sanction is lower than you asked for, the gap usually comes from the loan-to-value cap or the lender's income-to-EMI limit, and it has to be filled from your own funds before disbursement starts.
A Pune buyer gets a sanction of ₹62 lakh for a ₹78 lakh flat at repo plus 2.35% (7.6%) for 25 years, valid for six months, with a ₹10,000 processing fee plus GST. The letter requires her to pay ₹16 lakh of her own contribution to the builder before the first disbursement.
Buyers pay a large booking amount on the strength of a sanction letter, then discover the bank won't approve the project because of a title or approval gap. Ask whether the lender has already approved the project before you commit money.
Questions people ask about home loan sanction letter
Is a sanction letter legally binding on the bank?
Not fully. It's conditional on the property clearing legal and technical checks and on you signing the loan agreement. The bank can revise or withdraw it if those conditions aren't met.
What happens if my sanction letter expires?
You ask the lender to revalidate it. Most will do so after fresh income documents and a new credit check, sometimes at the rate then applicable.