The Benefits Of A Pre-Approved Loan
Buying a house is a big investment, having financial repercussions for years to come. Having a prior approval home loan ready may be of great use when you actually go for the big purchase.
What is a pre-approved home loan?
A pre-approved home loan is essentially an in-principle go ahead given by a bank for a particular loan amount. A robust process is followed by the banks to determine the amount to be sanctioned. They will require you to submit information such as income tax returns, bank account statements, income proof, salary slips, identity proof, and PAN (permanent account number) card details among various other things. Banks will also obtain data from CIBIL to check your credit history.
Once the checks are in place and the bank pre-approves the loan, it will hand over a letter stating that an in- principle approval of a particular home loan amount has been granted and will be valid up to a particular period. Some banks will also state the rate of interest at which the loan will be provided. This means the interest rate at the time of pre-approving of the loan will be applicable. A pre-approved loan is valid only for a particular period, six months in most cases, after which the individual will have to go through the process again. Loan amount disbursement is also subject to verification of documents and the property.
Also, several banks do charge a pre-approval loan processing fee, which is refunded if the loan is taken. Some banks, however, do not charge any fee.
Focussed home search
Getting a loan pre-approved will help you target a house that is within your budget. This will prevent you from getting confused.
Greater negotiation power
A pre-approved loan will make it clear to the seller that you are a serious buyer and also assert the fact that you have the financial means to close the transaction.
Quicker loan disbursal
Processing of the loan application will take place at a much quicker pace if the loan is pre-approved. This ensures that you save time. Many a time, individuals have lost out on good houses, because they were not able to garner resources in time. If you want to make sure that you do not want to lose out on a dream home due to external factors like running short of time, awaiting the loan sanction etc., you could opt for a pre-approved home loan, to ensure a smooth home purchase process.