Updated: Feb 18, 2022, 18:24 ISTShare:
Home Loan applicants often use the terms pre-approved and pre-qualified interchangeably. However, there are significant differences between the two. Read this post to know more.
Home Loans come with their own set of vocabulary that prospective applicants should master, to avoid discrepancies in the process. For instance, you might have come across the terms ‘pre-approved’ and ‘pre-qualified’, while trying to learn more about home loans.
While these terms are often used interchangeably, they are not the same. Here’s the difference between pre-approved and pre-qualified loans -
What is a Home Loan Pre-Qualification?
Lenders have their own eligibility criteria, based on which, they approve loan applications and determine the loan amount. For instance, if you are looking for a home loan worth Rs 50 Lakhs, you might only get approved for Rs 30 Lakhs, depending on your eligibility. Therefore, before setting sight on a property, it is wise to get an estimate of the loan amount you are eligible for.
The pre-qualification process helps in this regard. It requires a borrower to submit some basic details, like income, debts, assets, etc., to the loan provider. Based on these details, the lender provides an estimate of the loan amount the borrower is eligible for. Note that the pre-qualified loan amount is only an estimate, and not the final loan amount.
Pre-qualification generally involves a verbal discussion between the applicant and the loan executive
Some lenders allow you to get pre-qualified, online
It can take from 1 to 3 working days, for a lender to complete the pre-qualification process
The loan amount is calculated as per the basic details provided by the borrower
Knowing the estimated loan amount makes house hunting easier.
What is Home Loan Pre-Approval?
Pre-approval is the next step, after pre-qualification. In this step, the lenders initiate a comprehensive analysis of a borrower’s eligibility. The applicants are required to submit the loan application form, along with the necessary documents for pre-approval. Factors like income, credit score, existing debts, etc., are closely verified by the lender herein.
While pre-qualification only provides a rough estimate of the loan amount an applicant is eligible for, pre-approval offers a more definitive answer. However, pre-approval still does not guarantee the exact loan amount, or even confirm the approval of the loan application.
Pre-approval is a more involved process that requires the submission of the loan application, and documents for verification
Some lenders do offer online pre-approval services
It can take up to a week for a lender to complete pre-approval
Details like credit score, income, employment history, existing debts, etc., are verified for pre-approval
Offers a more definitive estimate of the loan amount
Why Should You Get Pre-Qualified and Pre-Approved for a Home Loan?
Now that you know the differences between pre-approved and pre-qualified, it will help if you understand why prospective home loan applicants should consider them, next. Here are some of the top reasons -
It offers a more realistic overview of the loan amount you are eligible for, before you start searching for a property
It helps you choose the best lender as per your loan requirements
The pre-qualification and pre-approval letter from the lender can help accelerate the application and approval processes.
Get Pre-Qualified and Pre-Approved for Hassle-Free Home Loan Approval
Being pre-qualified and pre-approved for a home loan can help accelerate the application and approval processes. By allowing you to know the estimated loan amount based on your eligibility, these also enable you to choose a property within your budget.
Look for a reputed lender that offers online pre-qualification and pre-approval facilities. If you’re planning to take a home loan to eliminate any uncertainty and proceed with more confidence, here’s wishing you luck.