What are pre-approved home loans?
It is a milestone when you realise that you can finally afford to buy a house of your own. Whether it is using your savings or through a home loan, it is almost like a rite of passage as an adult. A bigger milestone is realising that you are trustworthy enough in the credit world to get pre-approved for a home loan!
There are three factors you need to understand about a pre-approved loan:
1. It comes with a validity period
When a lender offers you a pre-approved loan, they do that based on your current credit worthiness, and their own capacity to offer home loans. With time, both can change. Which is why the pre-approved home loan comes with a certain validity period. Often, the period is around 3 months. So, if you need to apply for the home loan, you need to do that within that validity period. If you can’t, you can get re-appraised for the home loan by paying a nominal fee and submitting all relevant documents such as income proof.
2. The terms of the home loan can change
Even the best home loans for you will need to change their terms over time. For example, if you are getting a pre-approved home loan at an attractive interest rate, it may increase or decrease between the time it was offered to you, and the time you apply for it. This is due to various variables such as government regulations, the lender’s own policies, the supply-demand link, etc. Be mindful that the loan amount, tenure, rate of interest can all change in the interim period.
3. In-principal approval is different from approval
Whether or not the home loan gets disbursed to you depends on whether you have chosen your property within the validity period or not. Also, the in-principal approval turns into a loan disbursal only when the property meets the lender’s legal and technical requirements. For instance, if the property title of the house that you wish to buy is disputed, the lender may not be too keen to approve the final loan. Hence, be mindful of these factors when you consider how the pre-approved home loan can help you.
Now that you know what a pre-approved home loan means, let’s consider how it helps you:
4.Streamlines the property search
When you have a pre-approved loan, you have a realistic idea of your budget for the house. This helps you when you’re considering different properties as you now know what budget range to search within.
Aids negotiations with potential sellers
When you are armed with a pre-approved home loan, the potential seller also takes you seriously. You may get preference over other potential buyers who may not have the funds ready to buy the house.
Since you are a pre-approved borrower, the turnaround time from application to disbursement is shorter compared to when you first apply for a home loan. This saves you precious time in case the property prices change in the interim.
Go ahead, make the most of your pre-approved home loans to buy your dream house!