Pre-approved Home Loan: Why and How Should You Get It Done?
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Pre-approved Home Loan: Why and How Should You Get It Done?

  • Highlights

  • Pre-approved loan acts as a sanction by the lender

  • It is valid for a particular time frame (60-90 days)

  • Interest concession on pre-approved loan is allowed by most banks

  • Processing of pre-approved offer is relatively faster

Owning a house that one can call a home is every individual’s inherent wish. Besides every other consideration, this need warrants sufficient funds at your disposal. But if you don’t end up meeting the pre-requisite cash supply, you can apply for a home loan from a reputed bank or other financial institutions.

However, an extensive loan disbursal process or a probable delay in the loan application process can put all your plans on the back-burner, considering both demand and price of real estate are on a perennial upswing. But again, this is exactly where a pre-approved home loan assumes paramount importance, bringing closer both the ends of the spectrum – your home and the required funds to make it possible.

What is a pre-approved home loan?

Essentially a sanction by the lender, pre-approval is the process whereby a bank determines a borrower’s eligibility for a home loan, based on the individual’s financial standing, credit history, net worth, age and repayment record. Such a loan has its own advantages such as a relatively low interest rate, easy documentation and quick processing.

Unlike a home loan, this does not involve scrutiny in to the technical and legal validation of the property you wish to buy. After having probed all the parameters and variables at play, the bank will assess whether you are eligible and accordingly license a loan, attach a specific rate of interest, payable over a definite period of time.

The borrower can avail of the pre-approved loan, only after submitting all relevant property related documents the bank needs for subsequent due diligence. However, a pre-approval doesn’t add up to a guarantee by the lender. It is only an eligibility check and the lender retains the final right to approve of the loan once you have shortlisted the property and collated important paperwork. Generally, the pre-approval stands valid for about three months; however, it is up to the specific lender’s discretion.

Important features of a pre-approved home loan

- It is not tantamount to a guaranteed home loan sanction, which ultimately depends on complete verification of all relevant documents, among others
- These usually carry a lower interest rate but other processing charges may be attached; such fees are non-refundable
- It stands valid for a definite time frame
- Borrower’s credit limit gets affected to the tune of the pre-approved amount; meaning your ability to repay a personal or an education loan (if you apply for these in the meantime) will be arrived at basis the loan you want to pre-approve
- Most lenders will allow a concession on the interest rate levied on a pre-approved loan
- Processing is relatively faster, considering the bank already has most of the relevant papers

Home Loan EMI Calculator

Why should you opt for a pre-approved home loan?

- A pre-approval letter might be the key to your home, figuratively and literally speaking. The fact is that the housing market is a tremendously competitive one that rolls along at breakneck speed. The seller might want to see a pre-approved letter from the lender, a document that endorses your seriousness and dedication towards the property and also establishes you as a valid and able potential purchaser.
- You will have been well-acquainted with the process of availing a home loan by the time the opportunity materializes
- You will be able to plan your budget depending on the sanctioned pre-approved amount
- Processing and finally approving the home loan amount will be a faster process once you have it pre-approved

How will you get a pre-approved loan?

Before getting to how can you pre-approve a home loan, you should iron out the creases in your credit score and credit report. This will help you with an estimate of the kind and value of the loan as well as the interest rate you would be tentatively up for.

Now if you have crossed the initial frontier, it is time to get down to other details:
- Present all information related to your income

You have to supply income related information to the lender prior to getting the loan pre-approved. This could include details of paychecks and bank statement over the last six months, salary slip, Form 16 (TDS certificate), IT returns (usually pertaining to the past three years) and other auxiliaries such as balance sheet, profit and loss records, etc.
- Furnish personal information

A valid identity proof and a document validating the existence of your business (for self-employed individuals or entrepreneurs) are other information you will have to furnish prior to the pre-approval process.

The rest of the process, that could take anywhere from a day to a month, is executed by an underwriter. Remember that securing a pre-approval doesn’t really bring you within striking distance of the home loan. You will have to submit all relevant documents once you have selected the house you want to buy, within the pre-determined time frame as mentioned in the sanction letter.

Bajaj Finserv’s pre-approved offers on home loan and other loans including personal loan and personal loan make it easy to avail finance. You can also check your pre-approved offer by sharing a few basic details.

Home Loan Instant Approval

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