Home loan is the best option for buying homes for a majority of the section of the society. Those who can afford to pay the home money upfront, prefer taking loans to get some tax relaxations. Very few people actually know what they are getting into. Most of the first-time borrowers go blindfold and believe whatever they are told by the agent. Pre-approved home loans offer the best way to get relieved of the pressure of buying a home. You may exactly know how much home you can afford, what is your affordability quotient and how this loan would set your credit score well for future. Let us know more about it.
If you are planning to buy a house, and reading some articles online, you must have come across the suggestion to get a loan pre-approved. Pre-approved home loan means getting a nod on the home loans from banks or other financial institutions well before someone selects the property to invest. What happens here is the bank go through the financial status of the applicant, his credit history, his capability of paying and how much loan he can afford. Thus, indirectly, the applicant gets to know how much he can invest in the house to live a comfortable life. The applicant has to pay a fee for the pre-approval of loan which is refunded when draws the loan or the fee is fortified if he does not avail the loan for the fixed time period; generally two to six months.
1. Clear idea of financial capacity
The banks examine the financial status of the person carefully and give a clear idea of its borrowing capacity. Thus, a person knows how much house he can afford to buy on loan without putting too much pressure on the lifestyle.
2. Accelerated process
If someone is sure to buy a house within a few months, it is a good idea to get pre-approved loans to make the process faster. All the financial verification is already done, only the bank needs to verify the details of the property. Thus, one can buy his dream house sooner.
3. Better property search
One can easily get emotional and buy a house well beyond his financial capacity. The pre-approved loans keep him on track and make the property search focused. There is no possibility of going out of the budget.
4. Better negotiation status
Pre-approved loans mean the buyer is determined to buy. The builders take them seriously when they come with the pre-approved loans. They buyers also have an edge over the other prospects and can negotiate the price better.
5. Discounts from banks
Banks also promote the pre-approved loans and they offer a discount on the interest rate. The discount is not significant on its own but since the prices of the property are in lakhs, one can gain discount in a few thousand easily which is a significant amount.
Points to keep in mind
1. Pre-approved loans do not mean that the bank is entitled to grant a loan to the person. It is just a sanction letter that shows the person is eligible to draw a loan but the property he is interested in should also check out.
2. The pre-approved loans come with a validity period beyond which one has to apply again for the loan paying the fee again.
3. If the rate of interest changes during the pre-approved loan period, it affects the loan amount drawn and thus, the actual loan may be different from the sanctioned loan.
One should always go for the pre-approval of loans if he wants to buy the property sooner. While the loan period is shorter, it also makes the property search faster.