Pre-Approved Home Loan

A pre-approved home loan offer is a home financing option that has already been sanctioned in principal before you have finalised the property deal. The process is similar to getting a regular loan, except that you can get the offer before identifying a property.

In such a case, the lender provides home financing based on your creditworthiness and credit history. The lender will issue a letter of pre-sanction to you once the validation process is completed.

This comes with a timeframe of 6 months, within which, you must finalise the property deal. In case you fail to get the property within the stipulated time, you can apply again.

Here are some advantages of a pre-approved home loan. 

• Quick Loan Disbursal: Since the approval process is complete in the pre-approval stage itself, your loan amount will be disbursed quickly once you finalise the property. This helps when you need to speed up financing to book your home or apartment at the earliest.

• Easier House Hunting: There are many types of residential properties, such as villas, flats, independent houses and more. Getting a pre-approved home loan will help you gauge your budget and make searching the right house easier. 

Based on your financial capacity, you can now narrow down your research.

• Better Negotiating Power: You can leverage your sanction letter to negotiate with the builders or real estate agents. You will be taken more seriously due to the evidence of your financial capability. This is another essential benefit of a pre-approved home loan.

• Financial Planning Becomes Easy: A pre-approved home loan offer can help you plan repayment and manage your finances better.

You can use a home loan EMI calculator to check your monthly instalments for different tenures.

Some of the things that you should be mindful with regards to a pre-approved home loan are:

• Potential Harm to Your CIBIL Score: Lenders will perform a hard inquiry for your CIBIL score. If you have applied for a number of loans and credit cards recently, this may just bring down your CIBIL score. Additionally, if your home loan application is rejected, your CIBIL score will fall further. 

• Possibility of Rejection: Even if you have a better chance to get pre-approved for a home loan, your application can still get rejected by the lender. Rejection may be due to factors such as inadequate income, unhealthy repayment history or a CIBIL score that does not meet the credit score criteria.

• Limited Selection of Properties: Lenders will offer you a pre-approved home loan for only a handful of properties, which have passed their own set of checks. This means that your choices for a home that you can buy from the pre-approved home loan amount are fairly limited.

• Same Interest Rate May Apply: The interest rate applicable at the time of you receiving the offer may be the same at the time of you applying. So, if housing loan interest rates fall, you may not be able to take advantage of the reduced rates.

• Limited Period Offer: Pre-approved home loan offers come with an expiration date of anywhere between 3 to 6 months from the time you get the offer. If you want to purchase a home through a housing loan you will need to apply within that particular time period.

Pre-approval and pre-qualification are two different levels of getting instant home loan pre-approval. Although these terms may be synonymous, here are some key differences between them:

• The lender proposes pre-qualification based on your financial details, whereas you must apply manually for a pre-approved loan. 

• For pre-qualification, you do not need any property documents. However, your pre-approval loan will only be sanctioned after property assessment. 

• During pre-qualification, the lender will not discuss the interest rates that apply to your home loan. With a pre-approved home loan, you will get a loan based on floating interest rates. 

• In addition to interest rates, you also get precise details of loan amounts when you receive a pre-approved home loan offer. Pre-qualification does not provide any information about the loan amount, but you can get these details from the lender.