Appropriate Time for the Buyer to Borrow Pre-Approved Home Loan

Dev Singhraha

Relocation Expert

To buy the house of your dreams you need to have adequate funds. But what when the person does not have enough of funds and wants to buy the house? Yes at such a time he/she needs to approach the bank or financial institution to get the funds they may be in short off. So these loans are further bifurcated as pre-approved home loans and the regular home loans.

So further let’s understand pre-approved home loans in detail:
Pre-approved home loan means the buyer has the loan ready in the pocket borrowed from a bank or any financial institution to purchase the house property even before he/she approach the developer to negotiate. Buyer cannot be assured of getting the home loan until and unless the bank scrutinises all the details and approves it. The home loan eligibility by the bank is done by looking at the financial eligibility of the borrower, his/her repayment capacity and his/her past credit transaction looking at all these factors bank makes its final call over the approval of the loan.

Steps to get a pre-approve home loan

All the true and correct information needs to be supplied to the lender for assessing eligibility for getting the loan.
Verification of the personal and financial details.
Submit all the necessary documents like deposit, security, assets, liabilities and income for verification.
Submit all the details of the property once the purchase is finalised.

Advantages of pre-approved home loan

The most important advantage of getting a pre-approved home loan is that it helps to notify you about the loan quantum that you are eligible for. This will not only help to assess your affordability clearly but will also help you to plan the down payment of the loan.
With a pre-approved home loan in your pocket, it helps the borrower to strike better deals with the developer because you have already established your reliability with the loan offer letter.
Secondly it also helps to cut down the turnaround time of the total transaction.
Some developers acknowledge payment capacity with pre-approved home loans which defines the seriousness of the buyers, and this may strengthen buyers bargaining power when they negotiate.
Once the property is finalised only the property’s paperwork need to be done whereas the paper work for the loan is already done and the funds are handy so this saves a lot of time.

Disadvantages of pre-approved home loan

However when one borrows a pre-approved home loan he must understand that the loan is the cause of the bank and not for the individual being offered thus it is advisable to think twice before accepting the offer.
The flip side of such loan is that it is not always a win-win situation. The borrower may lose the processing fee if he defers the purchase or decides to shift to another lender. "The processing fee is not refundable one must remember that. If no processing fee is levied, you can consider it.
One needs to factor in the uncertainty of the actual disbursement while signing up for such loans. Even if he does take the decision within the prescribed cut-off date, the disbursal may be stalled if the bank does not find the property suitable.

Things one needs to be cautious of while borrowing the loan

Go through all the terms and conditions of payment and prepayment benefits to the borrower while borrowing the loan.
One should opt for a pre-approved loan only after zeroing on few potential properties if you are starting from scratch it’s advisable that it would be probably safer to finalise the property before proceeding with the loan-related paperwork.
You won’t be deemed to be approved for a loan if your income documents are not proper or the credit rating is low or if you have too many enquiries on your credit file.
Ascertain all the fines penalties in case of any default or late payments.

Hence, these loans must be utilised for essential requirements only in order to derive the best benefits from them. You need to take all your decisions seriously and take the time prepare yourself through every aspect so that finding your dream home a positive and pleasant experience rather than a negative one.

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