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Why getting a pre- approved loan a good idea?

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Why getting a pre- approved loan a good idea?

Before we proceed to discuss the benefits of a pre-approved loan, let’s discuss what it is. A pre- approved the home loan is the process in which the bank evaluates the application to check if the applicant qualifies for the home loan or not. In simple terms, pre- approved home loan is applying for the home loan without the home.
What do banks look at while acknowledging the pre- approved a home loan?

Pre- approved home loan is the process to verify your home loan eligibility. It does not involve any legal or technical validity. Lenders look into the financial capability of the buyer, their repaying capability, existing obligation, age, net worth, credit score and history. Banks extend a certain amount for a fixed period of time after evaluating the applications based on these parameters. Banks look into the determining factors that help in deciding the home loan eligibility at a definite Fixed Obligation to Income Rate (FOIR). The loan to value ratio has no role to play in the pre- approval of loans because there is no property involved in the market value.
Does it guarantee that your loan will get approved?

The main aim of the pre- approved loan is to determine your financial ability and whether you will be able to pay back the loan or not. It also helps the buyer look for the property that will fit in the budget.

But the pre- approved loan isn’t the guarantee that your loan will get approved. The reason is that you haven’t finalised the property yet. Banks look into the property before finalising the loan. A pre- approved loan can help you in setting your budget. The loan only gets approved after the bank has done the research on the property and made sure it falls under their LTV norms. A pre- approved loan letter is like the sanction letter.
How is pre- approved loan at your benefit?

The buyer will get acquainted with the home loan process. The buyer will also have the fair idea of what the bank expects from him or her. You can plan your budget and it will help you in getting the fair idea of the amount you have, amount you need to arrange.

The odds of getting the loan approved are much higher if you have a pre- approved loan.

The credit appraisal and loan disbursement happen faster for those will pre- approved loan. This is because the only verification that is required is the inspection of the property.
Things to keep in mind while applying for pre- approved loan:
  • The processing fee is non- refundable.
  • Make sure that the project that you are hoping to get a loan for, is an approved project.
  • You can ask the lender to add the co- applicant. This will increase your loan eligibility.
  • Pre- approved home loan is reflected in your credit score. Do not apply for it unless you have made up your mind to buy a house. 

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