Pre-Approved Loans Myth Busted
May 16, 2019 Home Loan
In comparison to olden days, buying a house now is an easier task. With bank financing most of our purchase, the buyer can fulfil their dream of owning a house, or even multiple houses, at early stages of life. Most buyers now are in their late twenties and thirties. With being self-aware of their finances and the banks guiding them through the process and tax benefits, buying a house is no more just a dream. It is a step away from reality.
To make sure your dreams are fulfilled quickly, the banks have also started offering pre-approved loans. The traditional loan application and loan approval can take up to weeks before getting approved while a pre-approved loan can get approved in within ten days.
Before we proceed further let us first explain what pre-approved loans are? When a buyer has made up a mind to buy a property but hasn’t decided on the particular property, the buyer can approach the bank, furnish all the details regarding the process and get the answer in some time. The banks will take in your financial standing, credit score, and credit history and based on them they will give you the amount of the home loan they are prepared to provide you. They will also issue you a letter mentioning the amount of pre-approved loan.
However, there are some myths regarding pre-approved loans which we bust below:
1. Pre-approved loans are the surety that you will get the loan:
False. Just like every other loan, the banks personally visit the property, judge the condition and do the calculations regarding the cost of the property. If the loan lender or the bank finds that the loan you have been approved is more than the cost of the property, they can refute from approving the loan.
2. It is mandatory to take the pre-approved loan:
It is not true. The pre-approved loan is given when you are still looking for a property to invest. If within the time frame you are not able to find the property, then the pre-approved loan cancels. Also, if there is any change in your financial standing after taking the pre-approved loan, the bank can refuse to give it to you.
3. Pre-qualified is similar to pre-approved:
Pre-qualified is when you approach the bank and inquire about the eligibility of the loan. The bank examines your financial standing and the paying capacity. The entire exchange is informal and verbal commitment. However, for a pre-approved loan, the borrower will have to fill out the application and follow the process of the pre-approved loan.
4. No penalty for not taking the pre-approved loan:
The processing fee for the pre-approved loan is non-refundable and can be as much as Rs 11,000. If you fail to find the right property within the given time, the bank will not refund the processing fee. Also, the attempts you make at the loan are reflected in your credit history, and too many rejected home loans requests reflect negatively on your credit history.
5. One can stretch the limit of the loan:
The period for the pre-approved loan is set and not extendable. It can range anywhere between 3 to 6 months. The borrower is supposed to find the right property within the given time period. The failure to do so will result in the cancellation of the pre-approved loan. Although, if you have a genuine reason as to why you were not able to find the right property within the stipulated time period and keep the bank in the loop, they might extend your time limit.
To make sure your dreams are fulfilled quickly, the banks have also started offering pre-approved loans. The traditional loan application and loan approval can take up to weeks before getting approved while a pre-approved loan can get approved in within ten days.
Before we proceed further let us first explain what pre-approved loans are? When a buyer has made up a mind to buy a property but hasn’t decided on the particular property, the buyer can approach the bank, furnish all the details regarding the process and get the answer in some time. The banks will take in your financial standing, credit score, and credit history and based on them they will give you the amount of the home loan they are prepared to provide you. They will also issue you a letter mentioning the amount of pre-approved loan.
However, there are some myths regarding pre-approved loans which we bust below:
1. Pre-approved loans are the surety that you will get the loan:
False. Just like every other loan, the banks personally visit the property, judge the condition and do the calculations regarding the cost of the property. If the loan lender or the bank finds that the loan you have been approved is more than the cost of the property, they can refute from approving the loan.
2. It is mandatory to take the pre-approved loan:
It is not true. The pre-approved loan is given when you are still looking for a property to invest. If within the time frame you are not able to find the property, then the pre-approved loan cancels. Also, if there is any change in your financial standing after taking the pre-approved loan, the bank can refuse to give it to you.
3. Pre-qualified is similar to pre-approved:
Pre-qualified is when you approach the bank and inquire about the eligibility of the loan. The bank examines your financial standing and the paying capacity. The entire exchange is informal and verbal commitment. However, for a pre-approved loan, the borrower will have to fill out the application and follow the process of the pre-approved loan.
4. No penalty for not taking the pre-approved loan:
The processing fee for the pre-approved loan is non-refundable and can be as much as Rs 11,000. If you fail to find the right property within the given time, the bank will not refund the processing fee. Also, the attempts you make at the loan are reflected in your credit history, and too many rejected home loans requests reflect negatively on your credit history.
5. One can stretch the limit of the loan:
The period for the pre-approved loan is set and not extendable. It can range anywhere between 3 to 6 months. The borrower is supposed to find the right property within the given time period. The failure to do so will result in the cancellation of the pre-approved loan. Although, if you have a genuine reason as to why you were not able to find the right property within the stipulated time period and keep the bank in the loop, they might extend your time limit.
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