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What Is a Pre-approved Home Loan and Its Benefits

Home. A word that has a different meaning for everyone - comfort, stability, pride, status, reputation or all of the above. One thing is for sure, however: most of us dream of owning one.
The most popular way to gather funds to buy a home is through a loan. Applying for a typical home loan needs you to make some decisions, like which property you want to buy. However, it may so happen that you haven't made the decisions but you know you want to buy a home and want to be fully ready for it.
At such a time: A home loan pre-approval is the way to go.
Pre-approved home loan features and benefits
So, what is a pre-approved home loan?
The process of applying for a traditional home loan usually starts after you have decided on a property. In such a case, you know the amount of loan you need. The lending institution checks the legal aspects of the property you have chosen before going ahead with the process.
Whereas for a pre-approved home loan, you usually apply when you have decided to buy a home but are yet to confirm a property. So, while pre-sanctioning a home loan, the lending institution will look at your income and financial standing before approving an amount, instead of at the property.
This sanction does not mean that the amount is granted, though. You can only avail of the loan when all relevant property documents are submitted to, and verified by the institution.
Features of pre-approved home loans
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1. Interest rate: These loans come with a slightly lower interest rate than traditional home loans.
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2. Duration: The pre-approval stands valid for a specific amount of time; usually 3-6 months. So, you have to finalise the property and submit the documents to the bank or financial institution within the specified time.
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3. Processing: The processing of the loan is usually quick because the financial institution already has most of the details related to your finances.
Benefits of pre-approved home loans
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1. Quick and easy claim: In most cases, most of your personal documents are verified during the pre-approval process, the final claim of the loan amount will be much quicker and easier when buying the actual property. The financial institution only needs to verify the property documents once they are submitted.
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2. Easier planning: If a financial institution has pre-approved a specific amount of loan, it becomes easier for you to look for properties within that amount or budget. It also makes it easier to plan your future finances concerning repayment.
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3. Easier negotiation: The pre-approval letter provided by the financial institution shows that you are serious about buying the property. This may make it easier for you to negotiate the price with the seller of the property. It might make you a stronger preference for the seller.
What do I need for mortgage pre-approval?
Although the process differs for each institution, here is a general idea of the steps you might need to follow:
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Step 1: Write an application letter to your bank or financial institution for a pre-approved home loan. Some even provide the facility to apply for such loans online.
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Step 2: Along with the letter, attach relevant documents that the institution asks for. These may include your ITR, a copy of your Aadhaar card, PAN card, salary slips, loan account statement (if any), etc. These will act as proof of your income, identity, address, and creditworthiness.
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Step 3: The financial institution then processes your application and verifies your documents.
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Step 4: At the end of the verification process, the financial institution will sanction a letter with the details of the pre-approval, such as the amount, the duration, the rate of interest, etc. Depending on the policy of your bank, these may be subject to further negotiation.
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Step 5: Complete the payment of the processing fees, and you're all good to house hunt based on your sanction letter.
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Step 6: Finalise the property of your dreams and submit the documents to the financial institution. On successful verification of the documents and the property, the bank shall grant you the loan amount.
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Step 7: Celebrate becoming a homeowner!
Conclusion
A pre-approved home loan from a trusted financial institution might just be the way to make your homeowner's dream come true. Your dreams are important and here at IIFL Home Loans we do everything in our power to help you turn them into reality. Visit our website to get more information and fulfil your dreams. Our home loans require simple documentation and paperless processing. Get a home loan approval in just 25 minutes with IIFL Home Loans!
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