Buying a property requires a substantial amount of investment, and most homebuyers seek home loans to fund their purchase. Those with sound financial condition and background can qualify for a pre-approved home loan. It is a lucrative financial instrument that many lenders use to attract customers and use their home loan facility without hassle.
While applying for a home loan, applicants face a lot of uncertainty regarding their loan approval, amount, and housing loan interest. A pre-approved home loan bypasses this uncertainty and offers customers a home loan in advance. The lenders approve the loan based on the customer’s financial eligibility, credit history, and repayment capacity. Let’s explore the advantages of getting a pre-approved home loan and know how to apply for one.
How Does a Pre-Approved Home Loan Work?
As its name implies, a pre-approved home loan is a loan that the lender sanctions before the buyer finalises a property deal. Although the home loan apply online procedure is similar to a regular loan, the borrower does not submit the property-related documents for loan approval. The lenders sanction such loans after checking a few mandatory documents, including PAN cards, bank statements, salary slips, ITR, residence proof, etc. The applicant pays a processing fee that the lender adjusts after the final loan disbursal.
Once approved, the borrower gets a pre-approval letter valid for a few months, during which they must finalise a property deal. Otherwise, the lender will cancel the pre-approved loan, and the borrower must re-apply.
Advantages of Getting a Pre-Approved Home Loan
- Easy and Fast Disbursal: Since most of the loan verification process is already complete during approval, the loan disbursal process becomes much easier and quicker. The only documents to be submitted are property-related papers. The lenders sanction the loan as soon as they verify the documents, helping buyers accelerate the buying process.
- Focused House Hunting: Residential property can be of different types, including villas, independent houses, floors, apartments, etc. Several times, people find a home they want to buy, apply for a home loan, and cancel the transaction because of low eligibility. With a pre-approved loan in their bag, the borrowers have a pre-determined budget, using which they can look for a house that fits in.
- Better Financial Planning: A pre-approved loan helps people know their financial standing, giving them an idea of their worth. Consequently, they can plan their savings and budget to make a suitable down payment and EMI management.
- Enhanced Negotiating Power: A pre-approved home loan enhances the borrower’s power to negotiate a better deal with the seller. Since they already have a considerable amount pre-approved for the purchase, the sellers consider them serious potential buyers. Similarly, if an individual has a pre-approved home loan, it means their credit rating is high and debt-to-income is low. As a result, they can negotiate better repayment terms and housing loan interest rates with the lenders.
Pre-Approved Loan Application Procedure
The pre-approved loan application process is similar to that of a regular home loan. These are the steps involved:
- Compare and find a lender offering the best terms and conditions.
- Check the lender’s eligibility conditions for a home loan.
- Submit the required documents to prove identity, residence, and income.
- Wait for the loan approval.
- Accept the loan offer if agreeable.
Once the applicants get a loan pre-approval, they can start searching for a property that fits the budget. For a regular home loan, the applicants must provide property-related documents for verification. However, with a pre-approved home loan, they must submit these documents after finalising the property deal. If the property qualifies for a home loan, the lender will disburse the loan amount to pay for its purchase. After purchasing the property with a home loan, the borrowers must pay their EMIs on time to clear the debt over the loan term. Like regular home loans, pre-approved home loans also have flexible repayment tenures that the borrower may select based on their monthly budget and repaying capacity.
Pre-approved home loans are highly beneficial for purchasing a property to call home. It is a financially organised way of owning a home through a home loan. Many NBFCs offer pre-approved loans for properties across the nation. The borrower may check the lender’s website and apply for a pre-approved home loan at the best housing loan interest rate based on their eligibility.