What Is a Pre-Approved Home Loan & Should You Take It?

A pre-approved home loan is an in-principle approval for a home loan with a specific interest rate valid for a few months. Generally, pre approval of home loan is taken before finalizing the property on a floating interest rate.   
 

Factors To Consider Before Considering A Pre-Approved Home Loan

There are a few things you must consider before a pre-approved home loan.

1. Loan Amount

It is recommended to assess the loan amount offered in a pre-approved loan. Check whether it is sufficient to meet the cost of the desired property.
 

2. Property Selection

Instant home loan approval is given based on your ability to repay. But the actual loan disbursement is based on you finalizing the property within the pre-approved validity period of the loan. Also, the property should satisfy the lender’s technical and legal due diligence criteria. So, even if the loan is pre-approved, the lender may choose not to disburse it if the property titles are unclear or the ownership structure does not align with the applicable norms.
 

3. Loan Validity

Always remember that the offer for a pre-approved home loan remains valid for a set period, typically around three months. It is advised to complete property selection within this time, as failure to do so will require revalidation of the home loan application, which incurs a nominal cost.
 

4. Interest Rate

Pre approval of home loan generally comes with a floating interest rate. You should always compare it with current market rates. Also, remember that the final interest rate will be determined at the time of home loan disbursement. But you can negotiate with the lender to secure a lower interest rate.

5. Terms Of The Home Loan

Please note that the loan terms mentioned in the pre-approved loan offer letter, including the repayment tenure, Equated Monthly Instalments (EMI), and interest rate, are subject to change. The final terms of the loan are determined at disbursement. For example, the interest rate on the loan may have altered at the time you finalize the property, resulting in some modifications to your loan terms.
 

6. Financial Stability

Evaluating your repayment capacity and financial stability is recommended to ensure you can easily manage the EMIs of your pre-approved home loan.

Why Should You Take Pre Approved Home Loan?

Here are some reasons you should always get a pre-approved home loan.
 

1. Negotiation Power

A bank's sanction offer is equivalent to cash. Once you deal with a builder with cash on the table, you can easily negotiate a better process.
 

2. Reflects Seriousness

If you are prequalify for a home loan, it reflects your seriousness in buying a property. The dealer would put more effort into offering you some amazing deals, as he would be sure of his commission and the property deal.

3. Focus On Home Search

Once the funds are arranged, half of the work is already finished. Now you can focus your time and effort on securing a better property deal.

4. Deciding And Planning Finances

Once you have the bank’s sanction offer, you know how much down payment you can arrange, and you can easily estimate the maximum value of the home you want to buy.
 

5. Quick Loan Process

Pre-approved home loan helps reduce processing time to one–third at the time of loan disbursement, as the basic verification and validation are already complete.

Conclusion

So, what is pre approved home loan? It is, in principle, a sanction provided by the bank after a basic check and validation of your finances, credit score, and ability to repay. The pre-approved loan provides you with a clear financial roadmap to select the property. However, you should keep in mind that financial terms may change, and you can negotiate to get better deals from the bank. Also, it is important to finalize a property within the validity period of the pre-approved loan. It is best to get Ratnaafin solutions to empower you with the best pre-approved home loan product at competitive interest.