My bank called me up to inform that it has extended a “pre-approval” home loan. What does that mean? How would it benefit me? - Ramesh Chandra, Gurgaon
Home buying brings along many anxieties, and getting a home loan approved rests at the top. But, you need not worry about getting a loan sanctioned with the pre-approval provision. A pre-approved home loan means that the bank is granting an in-principal approval to you, knowing very well that you are yet to identify a property.
Considering a pre-approval comes after thorough examination of credit worthiness of the borrower, you should feel relieved that the bank finds you worthy of lending. Usually, banks look for parameters like the borrower’s age, income, savings history and credit score to issue a pre-approved home loan.
What is important is that you now know how much you can borrow, which will, in turn, help you look for a house based on the funds available to you. This will further allow you to manage your home purchase within your budget.
The advantage of a pre-approved loan is that you do not have to rush to look for a house immediately, because the pre-approval is valid for a period of time. In case you do go for a home loan after the expiration of this period, the bank could reassess your eligibility, which could result in sanctioning a higher or lower loan amount depending on your finances at that time.
