Pre-approved home loans are getting a loan without much hassles. It saves a lot of time but serious understandings have to be done before you approach a bank and execute this instrument. There is a lot of uncertainty amongst people who apply for bank loans and a tedious process is in place to approve the loan. Pre-approved loans are a shortcut mechanism that avoids these processes and is offered after a primary check has been done on the individual’s credibility and ability to repay.
For the loan to be pre-approved the customer has to get an approval for the loan to be treated as such from the bank manager. The property details have to be shared with the bank who will verify the value, deeds etc. The repayment tenure, interest rate, penalties for defaulting etc. should be discussed and negotiated, then only the loan will be credited to the debtor. This is valid for a short period of three to six months and it’s advised to finish the transaction before the term expires.
The pre-approval is an advantageous proposal as it gives a better position in the negotiation of the property’s final price. This will also give you a better plan and will support your decisions from selection of the property to planning your finances and repayment methods. The biggest disadvantage is that the rate of interest is fixed and if they go down in the market you cannot get the advantage of low rates. The following steps have to be done before opting for a pre-approved home loan.
• A list of properties is made and decision has to be made from that list.
• Apply less frequently as it will affect CIBIL score.
• Terms and conditions of payment, repayment, tenure etc… are understood.
• The benefits are analysed.
• Penalties for defaulting and financial plans for repayment are considered.