What
is a pre-approved home loan?
It is basically an in principle approval for a home loan given by a bank based on your
credit profile. A number of banks offer this facility. For example, SBI has
rolled out a pre-approved home loan facility under the name SBI PAL. It
provides sanction of home loan limit before finalizing the property. The
customer will have to meet SBI home loaneligibility criteria and the bank will judge the credit profile based
on income and credit history.
What
is the procedure of getting a pre-approved home loan?
Banks offer pre-approval on home loans so
that the homebuyers can search for their dream home with confidence. Following
procedure is adopted by most of the banks for giving out a pre-approved home
loan-
·
Firstly, you have to apply for
a pre-approved home loan with the bank- either offline or online, though the
online option is not offered by all banks. At this point, you will also have to
submit the required KYC documents and proofs of your income.
·
Based on the furnished
documents and your CIBIL score, the bank will ascertain your repayment capacity
and decide the amount that can be sanctioned to you.
·
Next, the bank will issue a
loan sanction letter to you which will be valid for a definite period of time,
in most of the cases it is 4 months or 120 days. Other terms and conditions of
the loan will also be mentioned in the letter. The interest rate mentioned in
the sanction letter will be decided according to the prevailing market rates
and is also subject to change.
·
The bank will also charge a
processing fee which will be non-refundable. If you do not take up the offer
within the stipulated time, the amount paid as processing fee will be
forfeited.
·
Once you select the property
(before the specified time period), you will have to submit property documents
with the bank. When satisfied with the papers, the loan amount will be
disbursed by the bank.
Benefits
of Pre-Approved Home Loans
Pre-approved home loan helps you search for
your dream home with confidence as you don’t have to worry about the finances.
Given below are a few more benefits of pre-approved home loans-
·
Firstly, pre-approval gives you
peace of mind and helps in planning your finances. It gives a clear view of how
much you can afford and borrow so that you do not have to regret later and toss
the decision altogether. If the home loan falls short, you have enough time to
arrange funds from other sources to fill the gap.
·
While searching for a house,
builders also prefer buyers who already have a home loan at hand. So you will
have an edge over other buyers.
·
Since all your documents have
been already scrutinized by the bank, loan processing and disbursal will be a
quick process, unlike normal home loans.
·
Most of the banks use
pre-approved home loans as a promotional measure; therefore, you have a higher
chance of getting discounted rates.
Conclusion
Pre-approved home loans definitely bring a
certainty in your home-buying journey. However, issues like definite validity
period, risk of losing the processing fee, etc. might leave you in a muddle. It
is advised to shortlist a few properties and evaluate your personal finances
and then apply for a pre-approved home loan. This will give you a clear view of
the amount you can borrow from the bank and at the same time you will able to
choose the right property from the shortlisted ones, well within the validity
period.
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