All You Need to Know about Pre-approved Housing Loans

By Jay Dee Infra In Home Loan No comments

All You Need to Know about Pre-approved Housing Loans

The concept of home loans has become quite popular nowadays because they make it easier for you to clinch your dream property. Banks often call  individuals, encouraging them to take a pre-approved home loan which offers lower interest rates and are approved within 48 hours, thanks to faster processing and minimum documentation.

Pre-approved loans are typically loan approval given in principle to you on grounds of your profile by a financial institution or bank. When calculating your equated monthly installment (EMI), a bank looks at your history of payback, net worth, current level of income and the EMI outflow currently. Upon reviewing your profile, the bank approved of a particular sum which you can borrow as a home loan, with a stipulated period, normally 6 months.


Holding a letter of approval for a loan can be much helpful even before finalising the property you want to buy. However, there are several fine prints which you must look for prior to opting for housing loans that are pre-approved.

Unguaranteed status of Pre-approved loans

Pre-approved loans usually come without guarantee. Banks and financial institutions reserve the power of final decision about the disbursement of the amount approved. For instance, you have chosen a property, but the bank doesn’t lend for apartments that fall in the locality chosen by you. All in all, banks have the veto power over the final application approval.

Terms associated with pre-approved loans remain uncertain

Even though banks claim to have given loan approval, the interest rates and terms and conditions of these housing loans are still foggy and indicative at best. You would not be informed about the payback amount or the time frame of payback. Certain banks may spell out terms and conditions prior to pre-approval of housing loan. However, they may be subject to changes based on bank’s discretion.

Moreover, you would have to resubmit your documents at the time of loan disbursal. Unless the documents are submitted, your loan is liable to be rejected for property in India. This means working out additional documents.

Differences between approved and disbursed amount

You should always consider the fact that there may be a difference in the disbursed amount and the amount that was approved. If the final sum is higher you have to pay a larger down payment because you have limited scope of negotiation with the bank and your budget may be upset.

You should also carefully consider the indicative rates of interest in the letter. The interest rates mentioned are usually on a floating basis and if you want to take a fixed interest rate loan, then you should skip a pre-approved loan for property in India.

The processing fee for a pre-approval loan is non-refundable, irrespective of whether you take the loan or not. The loan approval is valid only for a specific time period.

Unless availed within that time, the pre-approval shall become void and you will have to reapply. If you keep applying for pre-approval loans a number of times, then you will be marked as someone looking for credit constantly and this could adversely affect your credit score.

Opt for a pre-approved loan only when you have shortlisted a property. Pre-approved loans expedite the housing loan process. Moreover, if you negotiate with the builder based on the fund available to you, he may bring down the price for you. Builders would rather negotiate with a person who has cash on hand rather than someone who has to raise money.

All You Need to Know about Pre-approved Housing Loans



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