Every person’s dream is to own a home that they can name their own. Apart from anything else, this demand necessitates having sufficient finances on hand. However, if you do not have the required funds, you can apply for a home loan from a reputable bank or other financial organisation. However, given that both demand and price of real estate are on the rise, an extended loan disbursal process or a possible delay in the loan application process can put all your plans on hold. But, once again, a pre-approved home loan can help you in achieving your dreams with all the cash required to make it happen. Irrespective of the type of your home loan you can use the home loan EMI calculator to know your monthly repayment amounts.
Pre-approval, which is essentially a lender’s sanction, is the process by which a bank verifies a borrower’s eligibility for a house loan based on their financial situation, credit history, net worth, age, and repayment history. Such a loan offers its own set of benefits, including a cheap interest rate, simple documentation, and speedy processing. Unlike a home loan, this does not necessitate a thorough examination of the technical and legal issues of the property you seek to purchase.
After investigating all of the characteristics and variables at play, the bank will determine whether you are eligible and, if so, will provide you a loan with a specific rate of interest and a set repayment period. Only after submitting all essential property-related papers that the bank requires for additional due diligence can the borrower take advantage of the pre-approved loan. A pre-approval, on the other hand, is not a promise from the lender. It’s just an eligibility check, and the lender has the final say on whether or not to approve the loan once you’ve narrowed down your options and gathered all of the necessary papers. In most cases, the pre-approval is valid for three months; however, this is at the discretion of the lender.
Features of a Pre-approved Home Loan
Some of the features of a Pre-approved home loan are as follows:
- It’s not the same as a guaranteed house loan approval, which is contingent on the proper verification of all applicable documents, among other things.
- These normally have a lower interest rate, however there may be additional processing costs that are non-refundable.
- It is valid for a specific period of time.
- The pre-approved amount affects the borrower’s credit limit, which means your ability to repay a personal or education loan (if you apply for these in the meanwhile) will be influenced by the loan you want to pre-approve.
- Most lenders will give you a discount on your pre-approved loan’s interest rate.
- Because the bank already has most of the necessary documents, processing is reasonably quick.
Why should you apply for a Pre-approved Home Loan?
A pre-approval letter could be the key to your home, both metaphorically and physically. The truth is that the housing market is fiercely competitive and moves at a fast pace. The seller may request a pre-approval letter from the lender. Which certifies your seriousness and commitment to the property while also establishing you as a legitimate and capable buyer. By the time the chance arises, you will be well-versed in the process of obtaining a home loan. You will be able to design your budget based on the pre-approved amount that has been sanctioned. Once you have it pre-approved, the procedure of processing and finally approving the home loan amount will be much faster.
Points to consider while applying for a Pre-approved Home Loan
You will be subject to a credit inquiry
Once you apply for a pre-approved home loan, lenders will conduct a credit inquiry. Your CIBIL score will be lower as a result of this check.
Your application may be rejected by lenders
Even if you are qualified for pre-approved offers, financial institutions have the ability to reject your home loan application. Several factors, such as a low credit score, a poor credit history, or a low income. This can lead to your application being rejecte.
Only licensed properties are eligible for the pre-approved offer
If the property you’re buying isn’t approved by the lender, your pre-approved offer may be denied. Before authorising a house loan, certain financial institutions conduct a property evaluation to ensure the property satisfies their qualifying conditions.
The offer that has been pre-approved will expire
Pre-approved loan offers are usually only valid for a short time. The period can last anywhere from three to six months. If it expires, you must reapply for pre-approved offers.
The home loan interest rate at the time of pre-approval could be the same- When your loan was pre-approved, the lender may have offered you a fixed interest rate. If the interest rate drops after you submit a formal application. You may not be able to get a lower rate.