A pre-approved home loan is the approval of a home loan to a customer before they finalise the purchase of a property. It assures you of a ready source of finance and adds confidence while negotiating with a seller or builder. By following certain criteria, banks and other financial institutions provide such pre-approved home loans to eligible customers. Here are some ways that can help you make the most of these loans.
1. Loan processing moves quickly and easily
The processing for a pre-approved home loan is quicker and easier than the application process for standard home loans. This is because the lender has already verified your income and repayment capacity. The only crucial formality in the application process is the verification of the property-related documents.
2. Helps you to set the home budget
Suppose you apply for a home loan for Rs. 1 crore, but you are eligible for only Rs. 70 lakhs. Your application is likely to be rejected in the case of a regular home loan. But in the case of a pre-approved home loan, you already know the amount of loan you’re eligible for. As such, when you select the property you want to purchase, you will bear in mind the pre-approved loan amount for which you qualify. This helps you set your budget and proceed further smoothly.
3. A better yardstick for loan negotiation
If a home loan lender has pre-approved a home loan for you at a certain amount, it becomes a good yardstick in your negotiations with other lenders. You can use the pre-approved loan as a reference point while comparing home loans provided by other lenders. As you intimate other lenders about your pre-approved loan, they may put in extra effort to offer you better home loan interest rates and amounts.
4. Put you in a better position for negotiation with the seller
As you are aware that your home loan is already approved by the lender, your confidence while negotiating with the builder or the seller increases. Even the seller is likely to show more interest in selling their property to you. This is because, unlike other prospective buyers, your finance is not to be applied for but already approved. It becomes apparent that you are aggressively looking for a home. Therefore, they would treat you as a serious buyer and offer attractive discounts to make faster payments.
When you have a pre-approved home loan, you can also use a home loan EMI calculator to get an idea of how much your monthly payments will be depending on different home loan interest rates. This kind of visibility helps you make a more informed decision. If you have a home loan provider you can trust with good service and loan terms, you can approach them for a pre-approved loan. With a pre-approved loan, you can enjoy a smoother home-buying experience.