A pre-approved or a pre-sanctioned loan is that home loan where the banks or the financial institutions sanction the loan amount beforehand based on borrower’s salary, creditworthiness, and financial investments as well as background. With this blog, let’s under the concept of this loan in detail:
What is a Pre-Approved Home loan?
With a fast pace life and hectic work schedule, everyone wants to enjoy a hassle-free procedure, especially in case of a home loan. From finalising bank to the approval of amount, the procedure is very tedious. Hence to make it simpler, now a day’s most of the borrowers are opting for a pre-approved home loan. Here, a loan borrower applies for a loan before finalizing the property.
Such type of home loan is completely different from traditionally-offered loans that are given based on the property price.
However, in case of a pre-approved loan, a borrower gets the clarity of the sanctioned amount that helps them in zeroing down a perfect home that comes in their budget. It also gives them an idea about how much they have to gather for the down payment and how much saving and other funds they need for any kind of emergency.
The other advantage of the pre-approved loan is that here banks don’t ask for any property document during the approval procedure. Perhaps, they ask the borrower to submit all the documents within a given time frame, once the loan is approved. So, the buyer has to finalise the property within that period otherwise, banks have the full power to cancel the loan application.
Benefits of Pre-Approved Home Loan
In a pre-approved loan, all the verification and documentation is completed by the banks beforehand. Due to this, the home-searching as well as buying process becomes hassle-free.
Property search within Timeframe
It’s a normal tendency among the majority of homebuyers to search for a property taking more time than required as the budget is not fixed. However, a pre-approved home loan is a perfect solution to this problem. As the amount and timeframe are sanctioned by the banks beforehand, so buyers cannot waste time in searching for the right home. Generally, the banks give 6 month time to the borrower to zero down the right property and submit the required papers and documents to the bank.
Clarity about Budget
The best part with a pre-approved home loan is that they give clarity to the homebuyers about the budget they have to spend on purchasing their dream home. It also helps them to save for down payments as well as emergency funds.
In case of pre-approved home loan, the loan amount is sanctioned based on the borrower’s repayment capacity. So, maintaining a balance between loan EMI and day to day expenses becomes easy for the borrowers.
Better Property Deals
A pre-approved home loan also helps a borrower in getting enticing deals from the builder or the developer. With money in hand, a homebuyer can easily put in pressure on the seller and negotiate to get the best deal.
So, with these advantages, purchasing a home with a pre-approved loan becomes much easier and hassle-free for a buyer.