Everything You Must Know About Pre-Approved Home Loan

One of the most important goals for every person in life is to own a house that they can call home. However, many struggle with arranging finances on time to fund the purchase or do not get the requisite amount as a home loan for the chosen property, thus settling for a smaller house.

Therefore, to avoid such instances and ensure you get to own the chosen house property, it’s better to go for a pre-approved home loan.

In this blog, we will be discussing the basics of pre-approved home loans and how to get one.

What Is A Pre Approved Home Loan?

A pre-approved home loan is an in-principle approval for a home loan based on the repayment capacity, creditworthiness, net worth, and age of the person. The home loan disbursal is subject to identifying the home property within the validity period and the property meeting lender’s technical and legal specifications.

Generally, a pre-approved home loan comes with a validity period of three months. Failing to find a suitable property within the time period will need you to get your home loan application reappraised by paying the processing fee. This means that the lender will re-assess your financial details and creditworthiness to extend the in-principal approval of the home loan.

How To Get Pre-Approved For A Home Loan?

Applying for a pre-approved home loan is like applying for a home loan. Therefore, before applying for one, you must bring your finances under order and iron out all the creases in your credit report. It raises a hard inquiry on your credit report, which gets reflected in the same.

For the pre-approval process for a home loan, you need to meet all the eligibility criteria required by the lender and provide all the documents except the property documents.

The following are the documents required for a pre-approved home loan:

• Duly filled-in home loan application form
• Two passport-size photographs
• Identity proof
• PAN Card
• Proof of address
• Last six-months bank statement
• Last three-months payslip
• Personal asset and liability statement

You also need to pay the processing fee for securing the pre-approved home loan and the entire process can take from a few days to up to a month.

Things To Note While Applying For Pre-Approved Home Loan

• The lender may reject your application at the stage of property verification or even before. A pre-approved home loan doesn’t mean a guaranteed home loan sanction.
• The pre-approved home loan is only valid for an authorized property or that which meets all technical and legal specifications.
• The rate of interest may differ at the time of loan disbursal.
• The offer for the pre-approved loan is for a limited duration, usually ranging between 3 to 6 months.

Benefits of Pre-Approved Home Loan

1. Helps in effective property search:

Since you have a clear picture of how much you can get as a home loan and how much to arrange for the down payment, you can focus your search on the property in that same price range.

2. Better negotiation with property developer:

With a pre-approved home loan offer in hand, you will be considered a serious buyer, and the builder will try to offer you an attractive deal compared to other random people looking at the property.

3. Lower turnaround time:

The time taken for disbursal of the home loan amount will be less, and your experience will be smooth compared to the home loan process where everything is done at once, from verification to disbursal.

4. Effective financial planning:

Pre-approved loans help the person know his/her financial standing and give more insight on how to manage finances, plan savings, and make down payments accordingly.

Why You Must Opt For A Pre-Approved Home Loan

In the normal home loan application process, you first need to zero down on the property, and then your lender will evaluate the property, and finally valuation checks will be done to ensure the property you are buying is worth the loan.

But, when it comes to a pre-approved home loan, you may get the list of sanctioned house properties that are already evaluated and passed by the lender. The risk of home loan rejection is lower, and you will be able to find your dream home a lot quicker.

Furthermore, you don’t need to frequently follow up with the officials to get the home loan application passed, making the entire home loan pre-approval process seamless and less complex.

However, there are a few limitations to this process. For one, you will have a limited set of properties to choose from. Secondly, if your home loan pre-approval application is rejected, it harms your CIBIL score, impacting your ability to take a home loan or any other loan.

Must Read: What is CIBIL Score - How Does it Impact Your Home Loan Application

Conclusion

A pre-approved home loan can save you the anxiety of having to wait for the bank or NBFC’s approval on your home loan application. It will bypass all uncertainty and make home loan procedures hassle-free for you. Make sure you have done your research well before applying for any kind of home loan.