Loan Sanction & Agreement – Final Approval from the Bank

After your documents are verified and your property is appraised, the next major milestone in the home loan process is the Loan Sanction & Agreement stage. This is when the bank officially confirms that your loan has been approved — and the terms are locked in via a legal agreement.

Let’s break down what happens during this step and why it’s one of the most important in your journey to homeownership.

🏦 What is Loan Sanction?

Loan Sanction means your lender has agreed to give you a home loan based on:

Your creditworthiness
Income and repayment capacity
Legal and technical clearance of the property

The bank will issue a Sanction Letter, which contains all the important loan details.

📄 What is a Sanction Letter?

A Loan Sanction Letter is an official document that includes:

Loan amount approved
Interest rate (fixed/floating)
Tenure (loan duration)
EMI amount
Repayment schedule
Processing charges and other fees
Any conditions to be fulfilled before disbursement

⚠️ Note: This is not yet a legal contract. It’s a conditional offer — the final agreement comes next.

📝 Signing the Loan Agreement

Once you accept the terms in the sanction letter, you’ll be asked to sign a Loan Agreement, which makes everything official and legally binding. This agreement outlines:

All terms and conditions of the loan
Penalties for delayed EMIs
Responsibilities of both parties
Consequences of defaulting

You’ll also receive a Loan Kit, which contains all important documents and information for your records.

💰 Loan Security & Documentation

As part of the agreement, the lender will also require you to:

Create a lien or mortgage on the property
- The bank keeps the property as collateral until the loan is fully repaid.
Submit original property documents
- These are returned after the loan is fully paid off.
Sign ECS/Standing Instructions
- For auto-debiting EMIs from your bank account.

🖊️ Checklist Before Signing the Agreement

Before putting pen to paper, make sure to:

✅ Read all terms and conditions carefully
✅ Understand the interest rate structure (fixed/floating)
✅ Clarify prepayment or foreclosure charges
✅ Check EMI start date and grace period
✅ Keep a copy of everything you sign

⏳ Timeline for Sanction & Agreement

This stage typically takes 3 to 7 working days after property appraisal is complete, assuming no major issues arise.

🚫 Common Mistakes to Avoid

Not reading the fine print of the agreement
Accepting terms you don’t fully understand
Overlooking hidden charges or penalties
Signing without clarifying loan insurance requirements (some banks bundle this in)

✅ Summary

The Loan Sanction & Agreement phase is where everything becomes official. You now have a legally binding commitment from the bank to fund your property purchase. Once the agreement is signed and submitted, you’re just one step away from the final disbursement of funds — and becoming a homeowner.