Benefits of pre-approved home loans
When we apply for a loan, it is essential to know that the bank normally finances 80% of the property value which also depends on the location of the property, builder repute, documentation etc. Here, financial institutions play an indispensable role in building a dream home especially when our savings fall short.
Before we start with the benefits of pre-approved loans over a regular loan, it is important to know what a pre-approved loan is and how is the entire process of home loan pre-approval done.
What is a pre-approved home loan?
The name itself suggests that a pre-approved home loan is a sanction of loan that is done before finalising the property deal. This process is same as getting a regular loan sanctioned, only that you do not have to submit any of the documents related to property.
Lenders ask for few mandatary documents for validation which includes income tax return, pan card, address proof, bank account statement and salary slips. This process also includes a processing fee which is adjusted after the final loan is disbursed.
The lenders also fetch your CIBIL report to verify your creditworthiness. If the applicant has any pre-existing loan, then the existing loan amount will be deducted from the approval limit.
Besides, once the validation process is done the financial institution issues a letter of pre-sanction home loan to the applicant. This pre-approved home loan comes with a tenure of 6 months within which the applicant must finalise the property deal. In case the applicant fails to get a property within the time frame, he/ she must re-apply for the pre-approved loan as the processing fee is neither returned nor is it adjusted later in the home application.
Now that you are aware of the pre-approved loan and the process, let us look at the benefits that it offers.
Benefits of having a pre-approved home loan
Final loan disbursal becomes fast and easy- As a majority of loan verification has been done at the early stage, the process of loan disbursal becomes very quick and easy. The only pending documents for validation are the property documents. As soon as the documents are verified, the sanctioned loan amount is disbursed. This also helps the buyers when the property holds a shorter window of the transaction and a tenure for the process.
House hunt becomes easy and more focused- Real estate hosts an array of different houses viz, apartments, villas and independent houses. If the applicant already has a pre-determined budget, then the hunt for the house becomes comparatively easy. For instance, a person with a pre-approved loan of 60 lakhs will look for a house within 55- 65 lakhs.
Negotiation process becomes easy- Once you have a pre-approved loan, you can negotiate with builders and they take you seriously compared to any other prospective buyer.
Finances are more planned- Pre-approved loans help a person to know his/ her financial standing and give them an insight of their worth. Moreover, this helps a person to plan their savings and make a down payment accordingly.
Getting pre-approved for a home loan does not guarantee you that your loan will be finalised. Factors such as property and related documents and due diligence guidelines of the bank also play a crucial part. Further, the loan application should be done within the sanction period. Apart from these factors, a pre-approved loan always gives a head start which regular loans do not. Pre-approval of home loan also makes loan disbursement convenient and easy for the applicant.
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