Buying a home is a dream that everyone harbours. Most of us save up substantial amount of our earnings towards fulfilling this dream. But sometimes, our savings do not suffice leading to one resorting to taking of loan in order to make up for what is deficit. Many banks and financial institutions are providing loans much more conveniently than before. Pre approved home loans are one of the most hassle free and convenient ways to gather funds towards a home that you aspire for.
For an average person, buying a property (villa, apartment or plot) is a long-drawn process. It is never going to be an instant decision. The opinion of family members, friends, and other well-wishers play a crucial role when it comes to finalizing a property. Once the decision is made, it is advisable to apply for a pre-approved home loan sanction. This is the best way as one will get a clear idea regarding the budget available for making the purchase. This will help you in narrowing down the options available and would be helpful in completing the transaction as quickly as possible. For example, if you initially had plans to invest in a property worth 1 CR., you might have to settle for one that costs around 50 lakhs based on the amount sanctioned by the bank. The best part about this is the level of clarity, both the buyer and the seller can gain regarding the transaction.
Pre approved home loans are slightly different from traditional home loans. The basic difference being that pre approved home loans are based on the repayment capacity of the person and not completely dependent on the property itself. One does not need property papers or similar documents in order to apply for pre approved home loans. The bank or the financial institute in question will provide a stipulated period of time after the approval of loan to finalise the property. If one fails to finalise a property in the given time, one has to reappraise his loan application at a nominal cost. There will be certain terms and conditions that one must carefully study and understand, under which the loan may not be disbursed. The bank can deny the loan if the legal papers of the property are ambiguous or similar instances come to light. The terms of the loan like EMI, tenure, etc. can be changed at any point between the application for the loan and disbursal of the same.
There are quite a few benefits of taking pre approved home loans which make it a popular option amongst aspiring home owners who seek to buy a home. Some of them are listed below.
Since the verification to obtain the loan is done even before a person finalises a property, the process is much faster once the property is finalised and the individual wishes to close the deal. The approval for this loan does not depend on the papers of the property which means that the loan can be approved even before the property is chosen.
Once the loan is approved, the bank or the financial institution in question gives the individual a stipulated time period like six months or so. Usually home buyers tend to lengthen the process by comparing and looking at too many options and not being certain about how to proceed, which may even end in them not wanting to continue the search at all. However, in this case, the candidate must find a property within the said time which helps one in focusing and hastening the process of hunting for the right property.
Pre approved home loans are based on one’s capacity to repay the loan taken, which means the amount taken as loan along with your savings will give you a clear picture of where you stand financially and what is the budget that is comfortable for you. This further streamlines the individual’s choice in buying a home as now the budget is also fixed along with a fixed time period to finalise the property.
As the loan amount given to an individual is decided based on their repayment capacity, the amount will be such that he or she can pay comfortably without cutting down his day to day expenses. This will be less burdensome for the one taking the loan as it is customised based on the person’s capability.
If you have a pre approval for your loan, it is likely that the seller is more convinced about your interest in the transaction. It will also assure him that you are financially secure in going ahead with the deal and will not leave the transaction incomplete. The stipulated time frame will further provide him with an assurance that you do not intend to waste his time and that the deal will be completed in a set period of time without being dragged out unnecessarily. More and more builders are welcoming home buyers with a pre approval to take up their homes as the security and seriousness is already taken care of.
While it is true that you will get a pre approval for the loan based on your financial capacity, it is also true that the bank or financial institution may deny the loan if the legal papers of the property are questionable. While this may seem unpleasant, it is quite an advantage as they are indirectly adding an extra layer of verification. This will help the individual buying the property too, as he or she may not wish to be entangled in disputes which they may not have envisioned or might have overseen themselves.
Home loans will ensure that one does not have to wait till they have the full amount needed to buy a home which may be much later in life. If a person has a handsome income, and has saved enough, then he or she can apply for a pre approved home loan which will help them to buy a home at a much younger age. Isn’t it so much better to provide a shelter and abode to one’s family, a home that will see the family and children grow from infancy to old age?
You are now geared with all you need to know about the benefits of pre approved home loans. Loans help bridge the gap between the savings and aspirations of the individual. It is imperative to understand the working of the system, read and analyse the finer print, compare different organisations providing a loan and to get a legal opinion before finalising on taking a loan. The aim of taking a loan is to make the process of owning a home much simpler, and one should study and analyse enough to make a wise choice about the same.
For more details about home loans in India, do check out our Home Loan guide for first time home buyers in India
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