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Pre-Approved Home Loans- Is It Actually Helps You?


If you are planning to buy a house property for the first time and you have enough of cash to make the payment by your own than it is great but if you require to take loan for the same than it is advisable to check your loan eligibility from the lending bank before finalizing property for purchase.

Whenever we plan to buy a property, the very first thing which narrow down our search is our budget. But there is one more thing that we need to consider that is your loan eligibility. Loan eligibility is the amount of loan your bank is ready to offer you for the purchase of property. It varies from person to person as it based on multiple factors which includes monthly income, occupation, credit score etc. of the person applying for loan.

For Example- Mr. X shortlisted a house property worth Rs 50 lakhs. He paid Rs 5 lakh as token money out of his savings and assured owner of the property that he is applying for home loan and will make the rest of the payment i.e Rs 45 lakhs within one month. Being a software engineer with decent salary package make him believe that he will get loan easily. He applied for loan with all required documents, after processing bank approved Rs 35 lakhs loan instead of Rs 45 lakhs which made Mr. X in trouble.

This is one situation which can put you in trouble while making any such big deal. Even a small discrepancy in your document can be a reason for rejection of your loan request. Pre-approved home loans help you save your time and efforts, as this helps you look and shortlist the property which you can actually afford to buy.

ALSO READ :- How Much Home Loan Am I Eligible For?

What Is Pre-Approved Home Loans?

Pre-approved home loans is a process where borrower submits all the required financial documents to the lending bank to check his loan eligibility. One of the loan officer of the lending bank reviews all the documents to come to the conclusion – what is the loan eligibility of the person applied for pre approval of loan. Lending bank then issues a letter of pre-approval which mentions the amount of loan bank can offer to the borrower.

It basically help borrower to get to know his borrowing power. Letter of pre-approval does not count to be a final commitment from lending bank but can be considered as an estimated figure.

Borrowers can get there loan pre-approved from multiple lenders also.

Pre-Approval Of Loan


ALSO READ :- Home Loan From Parents Or Relatives Vs. Home Loan From Banks

Procedure To Get Home Loan Pre-Approved

Pre-approval of loan process starts with the initiative to approach a lending institution and get the list of required documents that you require to submit for initiating the pre-approval request. Once you submit all the required financial documents with processing fee, your financial health will be analyzed by a loan officer. Based on your income and expenses, credit score, other loans (if any), etc. loan officer will decide and a letter of pre-approval will be issued to the borrower mentioning the maximum amount of loan and interest rate on loan bank can offer to the applicant.

Documents Required To Get Home Loan Pre-Approved

Although every lending institution have there own standards which demands a set of documents. Here I am listing a set of documents which mostly all the lending institutions ask for:-

  • 3 passport size photographs
  • Identity proof ( Passport, Driving License, Voter I Card, Pan card, Employers I card)
  • Address proof ( Electricity bill, Phone bill etc.) / Business address proof.
  • Proof of date of birth
  • Income tax return for the last 3 years
  • Form 16 / ITR for the last 3 years for salary class
  • Latest salary slip for salary class
  • Bank statement for the last 6 months where salary / proceeds are credited

Advantages Of Pre-Approved Home Loans

Save Time & Effort By Looking At The Right Homes:- Pre-approval of loan let you know your upper limit which you can spend to buy your new home. You can give clear specification to your real estate agent about the kind of property you are looking for and the budget you have for the same. This not only save your time but also the efforts of yours and your agent as both have clear understanding of the budget.

More Focused On Examining the Right Homes:- Pre-approval of loan makes you free from the worry of finance which let you more focused towards other parameters. There are lot of other things which matters when buying home for residing like sun facing, garage space, parking area, seep-age problem etc..

Bargain & Negotiate On Price:- With Pre-approval of loan you can bargain on price or commission on deal from your agent as well as some other lending institution for a better loan deal.

Grab The Deal:- If there is one more party interested in the same deal – you can have upper hand by showcasing your pre-approval letter issued by the authorized lender as this ensures your financial capability to make the payment for the deal in due course of time.

Better Interest Rate:- Some lenders also offers lower interest rates to the borrowers getting there loan pre approved which benefits the borrower.

No Obligation:- You can get your loan pre-approved from one or multiple lenders as pre approval of loan does not bind you to a particular lending institution. You can choose to take loan from any of the bank as per your convenience.

Compare To Choose The Best:- Pre-approved home loans helps you compare other loan offers and choose the one that is most suitable to your needs.

Drawbacks Of Pre-Approved Home Loans

Time Limit:- Pre-approval of loan are subject to a fixed time line, which means pre-approved home loans remains valid for a specific time period which usually varies from 2 to 6 months. If you will not be able to make the deal within the stipulated time period then your agreement got cancelled and you have to reapply for the loan with processing fee. As processing fee ones paid is non refundable. (although this validity period varies with each bank)

Interest Rate May Change:- The rate of interest changes every month which directly impacts of the loan amount. So if interest rate increases in the duration of pre approval of loan and loan sanctioning period then you may bank can decrease the loan amount.

No Guarantee:- Pre-approval of loan is not guaranteed. Bank may not find the property suitable for granting loan then lender can stop the disbursement of loan.

ADDITIONAL DOCUMENTATION:- After finalizing the property that you want to purchase against the pre-approved home loans. You may need to submit additional documents to get the loan disbursed.

Difference Between Pre-Qualified And Pre-Approved Loan?

Pre-Qualification is a verbal information given by the lender to the borrower to inform how much a buyer can afford as there in no formal verification of borrowers data Whereas in case of Pre-approved loans a formal process laid down by the lending association take place where all the required documents gets verified and a letter of approval is issued to the borrower.

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