Pre-approved Housing loan: No Guarantee Bank Will Give Home Loan...!

A pre-approved home loan is usually offered by banks / housing finance companies to people who have a clean track record of loan repayment history.

You have found the home that you always wanted after months of going through builders / promoters / developers and brokers. You struck the deal only to find out later that the bank or housing  finance company (HFCs) did not approve the home loan well in time and you had to shell out penalties and in the worst circumstance you had to let go off that coveted deal.

Knowing your housing loan eligibility & the fact that the bank is willing to give that home loan to you can always help you strike the right deal and a pre - approved home loan can help inspire that kind of confidence.

What is a pre-approved home loan?

Normally, you would first finalize a house you want to buy and then approach the bank or HFCs for a home loan. Here, you first get a housing loan approved from the bank / HFC and then zero in on the asset you want to buy.

Usually, banks / housing  finance companies cross-sell these products to existing customers.

However, you can approach the bank / housing  finance companies yourself, too. You can either walk in to a branch or /  call the customer care service of bank / housing finance companies and ask if you are eligible for a pre-approved loan.

You will have to give your customer identification number or / your account number to the bank executive and he / she will inform you immediately whether you are eligible for any pre-approved home loan. The eligibility criteria is based on your income & your credit history.

Main features of Pre- Approved Home Loan..!

* You get Pre - Approved Home Loan even if you had pre closed your earlier personal loan or car loan amount. Some banks pre approve a home loan to its own customers even if they had not taken a loan at all based on certain conditions like the cash inflow &  transactions in their salary accounts or the repayment track in case of credit card holders. However, in both cases pre approved loan offers often come with a time limit to accept them.

* Generally, the time taken for processing of pre- approved home loans is much less thus reducing the risks of you missing out on the chances of getting that your dream house.

* In-principle approvals for home loans from banks / HFCs are a boon to people who have not identified a property yet.

* This will let the customer know how much the banks / HFCs will give him / her and search for a property (Land and House / Flat) accordingly.

Decide Exact Home Loan..!

* If you decide to take up the pre - approved homr loan the next thing to decide the exact home loan amount you would need. Usually, the banks / HFCs decide the pre - approved housing loan amount based on your previous loan repayment records or / your account balance, transactions & credit card transactions.

* And here you are in a better negotiating position. Having said that it becomes all the more important for you to decide on the home loan amount based only on your requirements and not simply for the reason it is being offered to you.

Interest Rates..!

* In the case of pre -  approved home loans the interest rates will be slightly lesser than or equal to the rate of interest offered to other customers .

*  Some bank offered an interest rate that was 0.5 to 1.5 % less than what was offered to other customers. However, this alone does not qualify for taking up the loan.   So it is important to check the loan offers from other banks before signing on the dotted lines.

* The interest rate for pre-approved home loans are the same as the rate offered for current home loans in some banks. For instance, if HDFC Bank offers car loans at 11.25 %, the pre-approved loans will also be sanctioned on the same interest rate.

* It is also important to clarify with the bank or HFC about the nature of the interest, particularly for pre-approved housing loans, whether it is fixed interest or floating interest.

Documents Need..!

* Often, the conditions for a pre-approved home loan are more or /  less the same for a home loan you may approach your bank for.

* Even for pre - approved home loans banks might require some documents except in the case of some in house bank customers and require the prior checks in case of home loans.

* Sometimes even a small discrepancy in the documents could be enough reason to cancel the pre approved loan.

* You have to submit documents such as your salary slip & income-tax return receipts for previous 3 years for such home loans.

* In most cases you would be the bank’s existing customer, most banks do not require documents such as PAN (Permanent Account Number) and identity proof.

* Most banks / HFCs do not ask you to repeat the documentation process when you finally have to use the loan, some do.

Processing Fee and  Validity ..!

* Some major banks even waive processing fee on pre-approved home loans. There is no extra charge for a pre-approved loan.

* Typically, a pre-approved home loan is valid till nearly 6 months after it is sanctioned.

* Even after a pre-approved home loan is sanctioned, the bank / HFCs is within its rights to withhold the loan. 

In other words, there is no guarantee that the bank will give the home loan.

So, the next time you get a mail or phone from banks about a pre approved home loan remember to look for the above details. After all, it is your money.

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