A pre-approved home loan is a type of loan provided on the basis of your financial standing, age, repayment capacity, and credit history even before the property is finalised. It is a quick process that does not require extensive documentation and legal authentication of the property you want to buy.
When the verification process is completed, the lender issues a letter of pre-approval that comes with a validation period, in which you’ll have to finalise a property.
Here’s all you need to know about pre-approved housing finance.
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Loan term
The terms attached to a pre-approved loan, like the rate of interest and loan tenure, may change during the validity period. So, the final loan terms are decided at the time of loan disbursal, not when the loan is sanctioned. For instance, the interest rate may change when you finalise the property, resulting in modifications in the EMI payable.
In such a case, a home loan EMI calculator can help you estimate the expenses depending upon the changes.
Validity period
As mentioned before, pre-approved housing finance usually comes with a fixed validity period. This validity period ranges from 3-6 months, depending upon the lender. The purpose is to give you sufficient time to finalise a property before the expiry of the approval letter. Lenders disburse the final loan only after the property documents are submitted and verification has been completed successfully.
Loan processing charges
Most lenders charge a nominal processing fee to carry out the pre-approval process, which is typically non-refundable. This amount usually differs depending on the lender and is charged either as a fixed amount or a percentage of the loan amount.
How to get a pre-approved loan for property purchase?
You can apply online or offline to initiate the pre-approved loan process.
1. To secure a pre-approval, you have to first fulfil the home loan eligibility criteria set by the lender. This will be followed by a verification process wherein you’ll have to submit the following document proofs:
- Valid identity proof
- Bank account statements (for the last six months)
- Salary slip (last three months)
- Address proof
- Pan card
- Income tax return or Form 16 (last 2 years)
However, this is only a standard checklist. The actual document proofs required for verification might differ depending on the lender.
2. Once you’ve submitted the required documents, lenders will carry out a verification process, and if you are deemed fit, they’ll sanction a pre-approval letter defining a validity period.
3. Next, you’ll have to select a property and submit its relevant documents within the stipulated period. The lender decides the other loan terms like home loan interest rate and tenure after the property valuation.
4. At last, if your chosen property meets the standards, you can get the required funds in a couple of working days.
In conclusion
As you can see, a pre-approved home loan can help you get started on the property search without any wait. From home loan eligibility verification to the final loan disbursal, the process is quick, easy, and straightforward.
Just make sure the residential unit you select comes under the lender’s “approved projects” list, and the rest will flow smoothly.
