In the normal course of applying for a housing loan, you first select a property and then approach a lender to get a loan for the same. Based on your eligibility and the credibility of the property selected, the lender approves the loan. However, you can also do it the other way around. You can first get housing loan approved and then look for a property. This is called pre-approved housing loan.
Let us look at some of the important details of such loans:
- What is a Pre-Approved Housing Loan?
A pre-approved housing loan is an in-principal or intent loan offered by financial institutions. It allows you to first apply for the loan and get approval for the same before selecting the property. The financial institutions approve the loan amount based on your eligibility.
In other words, with a pre-approved housing loan, you will be approved for a loan of up to Rs. X, which you can avail from the lender once you have selected a property.
- How Can You Apply for a Pre-Approved Housing Loan?
The application process for such loans is similar to a standard housing loan. The only significant difference is that in standard loans, you are required to provide details of the property you want to buy in the loan application.
But with pre-approved loans, you must mention that you are yet to identify/select a property. Apart from this, the application process and even documentation are the same.
- What are the Benefits of Pre-Approved Housing Loan?
Some of the top benefits of pre-approved housing loan are as follows-
- Bargaining Power
Once you are already approved for a housing loan, it will be easier for you to negotiate a better deal. Your loan pre-approval document will make you a serious buyer in the eyes of the seller/developer and they might offer you attractive discounts and preferential treatment.
- Easier Property Selection
When you know the loan amount, it is also easier for you to select a property that is within your budget. For instance, without pre-approval, if you choose a property worth Rs. 1 crore and need Rs. 80 lakhs as a loan, it is possible that you might only get approved for Rs. 50 lakhs when you apply for standard home loans. Pre-approval helps prevent such problems and makes you a confident buyer.
Should You Apply for a Pre-Approved Housing Loan?
While the pre-approval comes with several benefits, you should only apply if you are sure that you want to purchase a property. Multiple loan applications, even for pre-approved loans, can negatively impact your credit score, and you will also lose the processing fee if you do not select the property and avail the loan within six months.
