The Pre-Approved Advantage

Time to read: 4 mins | February 11, 2019

Thinking of buying a home? Before you start scouting around for real estate, it might be a good idea to get a Pre-Approved Home Loan.

A Pre-Approved Home Loan is basically an offer from the lender to give you a loan of a specified amount at a specified interest rate. The offer is generally valid for a limited period of time. A Pre-Approved Home Loan from Axis Bank, for example, is valid for 6 months.

This is how it works. You can either visit a local branch of Axis Bank or go to the online Home Loan application form on the Axis Bank website where you can submit your contact details to receive a call back from our executive. Based on your income, the Bank will assess the loan amount you are eligible for and will then give you a Pre-approved Home Loan offer. This facility is available to both existing as well as new customers of the Bank.

What are the advantages of a Pre-Approved Home Loan?

The biggest advantage is financial planning. With a clear idea of how much loan you can get to buy your dream home, you can now plan your budget and, if necessary, start making arrangements for additional funding.

The second advantage is that a Pre-Approved Home Loan simplifies the search for property. Now that you know the loan amount you are likely to get and the kind of additional funds you will need to raise, you can search for properties within that budget, making life easier.

The third advantage of a Pre-Approved Home Loan is in terms of faster processing of loan applications. A lender makes the decision to give a home loan based primarily on two criteria. First, of course, is your disposable income (i.e. your income minus cost of living expenses as well as other EMIs that you may have). The second is the property itself. Since the home that you plan to buy would be the security for the loan, the Bank wants to make sure that the title for the property is clear.

A Pre-Approved Home Loan offer means that the Bank has already made its judgment on the first criteria and decided the amount you are eligible for. Now it only has to verify that the title to the property you are buying is clear. This speeds up the loan approval and disbursal process.

A Pre-Approved Home Loan may also give you an edge in negotiations with the builder. It is a signal to the seller that you are a serious buyer who has provisionally tied up a substantial portion of the funds required. You may therefore be in a position to get a better deal.

You need to be aware of a few things, though, while opting for a Pre-Approved Home Loan. First and foremost is that the offer is valid for a limited period. If you don’t close the property deal within this period, the offer will lapse, and you will have to go through the entire loan application process again.

Secondly, please remember that disbursal is not guaranteed. During the validity period of the Pre-Approved Home Loan, if your financial circumstances change adversely or if the property you are buying doesn’t meet the Bank’s criteria, it may not disburse the loan.

Thirdly, you need to be aware that the interest rates may change during the validity period of your Pre-Approved Home Loan and if this happens, the interest rate actually charged to you may be different from the one mentioned in your offer letter. Please check this with the Bank before finalizing your loan.

You can repay your home loan with Easy Monthly Instalments. You can find out how much EMI you can pay by using the Axis Bank’s Home Loan EMI Calculator.

Disclaimer: This article has been authored by The Source, a Mumbai based content creation and curation firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & The Source shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.