Buying Your Dream Home? Know More about Pre-Approval of Loan

September 21, 2022

Buying your first dream house is an exciting journey and a milestone achievement. Right from browsing through listings, deciding the locality, choosing the builder to selecting the property and finally holding the key to  your dream home, it’s an experience that you will cherish for a lifetime. However, the process  is a little cumbersome and needs you to be financially prepared for a smooth and hurdle free execution. One smart way of home buying is to avail home loan, for with a considerably less down payment and an easy to manage EMI you can become a happy home owner without having to shell out a major portion of your savings towards payment for the house. In this context, it is important to know the prerequisites for easy and quick home loan approval, and Pre-Approval of Loan comes handy here.

What is a Pre-Approval for Loan?

A pre-approval loan is a formal letter from a lender, the bank or the financial institution you approach for loan, confirming that you are eligible for a specific loan amount based on your financial situation. The lender takes into consideration factors like your credit score, income, assets, debts/existing loans, to determine your loan eligibility. This loan letter acts as a preliminary agreement between you and the lender, stating that you are eligible for a loan up to a certain amount, subject to further underwriting.

What are the benefits of Pre-Approval of Loan?

  • Helps you Decide Your Budget: Pre-approval of loan helps you determine the amount that you are eligible for, based on which you can fix the budget for your house. Though the Pre-approval provides only an estimate of the home loan you can avail it helps you arrive at an approximate figure on your home budget and this would help narrow your home filtration criteria.  An idea of the maximum home loan amount that you are eligible for prevents you from over-extending yourself and taking up a financial burden that would cause instability to life. 
  • Gives You an Advantage in a Competitive Market: In a competitive market like Chennai, having a pre-approval letter can give you an advantage over other potential buyers. It Projects you as a serious and committed buyer who has undertaken the necessary groundwork to secure financing before beginning the house selection process. This gives you an edge in negotiations with the seller and helps you get your dream home.
  • Saves Time and Increases Efficiency: Getting pre-approved before house hunting saves you time and increases efficiency. You can eliminate the houses that are outside your budget and focus on the ones that are within your price range. Right at the outset houses that are way beyond the budget can be eliminated and this would save you time, effort and the risk of unnecessary disappointment.

Getting pre-approved for a loan before buying your first dream house is a smart step in the home buying process. It helps you determine your budget, gives you an advantage in a competitive market, helps you avoid overextending yourself, saves time, effort and increases efficiency. So, make sure to get pre-approved before you start house hunting to make your dream of owning a home a reality.

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