Buying a home comprise of many financial decisions like budget assessment, sufficient down payment, saving extra money for any emergency and much more. So, to enjoy a hassle-free home buying process, most of the individuals choose to take a home loan. However, in today’s time, a pre-approved home loan is mostly favoured by the loan borrowers. Why? Let’s understand in detail:
What is a Pre-Approved Home loan?
A pre-approved home loan is that loan which is offered by the banks or financial institutions after studying in-depth about the borrower’s repayment capacity. It is different from traditional home loans as they are offered based on the property price and budget.
The main reason behind the increasing popularity of such loans is because they offer clarity to the borrowers about the loan amount to be sanctioned by the lender as well as how much they have to pay for the down payment. This helps them in finalising a proper budget for the property they wish to purchase.
Also, in this case, banks don’t ask to submit property papers or other documents during the approval process. On the other hand, they give a particular time frame to the borrower to submit all the documents. The borrower has to finalize the property within the given time, failing to do so; the banks may cancel the loan application. The banks may reconsider it, but then a nominal fee is required to submit again. Moreover, the banks can also cancel the loan application is they found property papers illegal or ambiguous.
Advantages of Pre-Approved Home Loan
As the bank completes all the verification and documentation beforehand, so the property hunt becomes much easier as the homebuyer gets an idea about how much money they have in their hand. Due to this, a borrower looks or finalizes only that property which falls in their range.
Focused Search within Timeframe
A pre-approved home loan helps in saving a lot of time which particularly most of the home buyers waste in searching the right property. Once the bank approves the loan, they give 6 month time to the borrower to finalise the property and submit the required papers and documents to the bank. So, it becomes mandatory for the home buyer to end their search in that time frame only.
Clear Idea about Budget
With a pre-approved loan, a home buyer gets a clear cut idea about the management of budget and finances for the property purchase. They know how much they have to spend on down payment and how much they have to save for an emergency period.
As said above, a pre-approved loan is completely based on borrower’s repayment capacity, so paying EMI and managing day to day expenses becomes easy in this case.
A Pre-approved home loan also helps in finalising a better deal on the property purchase. As the loan amount is sanctioned beforehand, so you can put pressure on the builder to sell the property at the best price. Also, the builder gets an assurance that the buyer will complete all the transactions without any delay.
So, with these benefits, buying a home becomes much easier and hassle-free with a pre-approved home loan.