A home loan is one of the biggest loans that anyone would take in their lives. With the cost of residential property going up in recent years, the need for home loans too has increased, with people not being able to buy a home of their own unless they take out a loan. Getting a home loan can be a hassle if you have to jump through multiple hoops to meet the various eligibility criteria. This may seem overwhelming for you, but what if there is another simpler, easier, and quicker way to get a home loan?
You may be wondering what that is. Pre-approved home loans is the answer to it. Want to find out more? Here’s all you need to know about it.
A pre-approved home loan is a loan that is given in-principle even before you have selected a property. This gives you greater flexibility, freedom, and peace of mind to select a property since you can search for it within the limits set by your home loan. This way, you will not end up selecting a property that will be a strain on your budget.
A pre-approved home loan can be given as an instant e-approval also. You get it on the basis of several factors such as your income, age, credit worthiness, etc. It is valid only for a limited period of time, which means that you have to close the deal on your new property within that time period, whether you are buying a readymade home or are constructing a new house on residential property.
The major advantages of a pre-approved home loan are the following:
- Faster processing of the loan: Before you are approved, only your income documents are taken into consideration. When it comes time to avail the loan amount after you have zeroed in on the property, your property documents will be verified. This quick turnaround time ensures that you don’t miss out on any good deals and can buy the property of your choice as soon as you have selected it.
- Better deals: When sellers know that you already have the funds on hand, even if in principle, they are more likely to give you the VIP treatment, which can be anything from special discounts to attractive add-ons for the property. You will definitely be given preferential treatment over others, thus giving you a higher chance of making your dream property your own soon.
- Property search: It becomes easier to search for a good property when you know exactly how much you have in hand. You are able to optimize and quicken your search because you can narrow down the property based on the budget which you have been cleared for. There is no ambiguity which means there is less stress and uncertainty. This is not only good for your budget because you won’t end up overspending or biting off more than you can chew, it is also good for your peace of mind.
There are a few things to keep in mind about a pre-approved home loan which are:
- The validity period will only be for up to 6 months, though this can vary from bank to bank. You have to complete your property search within that time period.
- If, for some reason, you are not able to complete your purchase within that time period, there is no need to stress about it. All you have to do is provide your latest income documents and get your loan re-appraised by the bank.
- The loan terms given to you at the time of the pre-approval may change by the time of the loan disbursal. This means the interest rate, loan tenure, EMI, etc. This is because interest rates may change with repo rates being revised by the RBI, which is happening more frequently nowadays. This will turn out to be beneficial for you if the repo rates are reduced and your bank decides to pass on the reduced interest rates to the customers as well. Since home loans are now mostly based on floating interest rates, this will work out better for you in the long run.
- There can be a change in interest rates if your credit score improves within the time period given for your loan, if your interest rate is based on the credit score. So you can use the validity period to work on your credit score to improve it even more.
- If the property documents or titles are not clear or accurate, even if you have a pre-approved home loan, it can be denied at the last minute. It is also important to check the ownership structure mandated by the bank and ensure that your property fits the norms otherwise it can be rejected..
Knowing the advantages of a pre-approved home loan, you can now compare and research different loans to make your final choice.
