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.