Finding a mortgage is the second-biggest challenge for a home hunter after choosing the property for their ideal residence. But during the past few years, a new product in the housing sector has become more well-known and well-liked: the pre-approved house loan.

Pre-approved house loans are starting to have a bigger impact, allowing potential homebuyers and borrowers to have a pre-approved IDFC home loan offer in hand with in-principle approval before deciding on a specific property. Even though it may seem profitable, be sure to research into these loans further before applying for one.

First off, pre-approved loans are, as their name implies, loans that lenders give to target and eligible homeowners based on variables such as credit score, income, geography, etc.

Unlike a typical house loan, this pre-approved DMI housing finance loan does not accept customer applications because, if you qualify, the lender will extend the loan directly to you.

Let’s now examine this in greater depth.

Benefits of a preapproved mortgage

Greater negotiating room with the builder or seller

The process of finding and choosing a property for your home is made slightly easier when you have a pre-approved DMI housing finance loan offer in your possession because your search is limited to properties that fall within the pre-approved loan amount provided by housing loan. Your credibility with builders and promoters will rise as a result of having the pre-approved sanction letter, which also gives you more negotiating power to choose a suitable property within the pre-approved loan amount.

Additionally, it gives you an advantage over people who obtain conventional home loans by looking for a property first and then approaching a lender. Due to their capacity to make payments more quickly than other buyers, developers or sellers may give applicants with a pre-approved house loan offer greater treatment and enticing discounts.

More rapid loan processing

DMI housing finance typically assesses your application based on your income, credit history, and repayment capacity at the pre-approval stage. The only duty remaining after choosing a property is to check and evaluate it, after which the final loan disbursal is likely to occur, shortening the turnaround time for the complete IDFC home loan procedure (from loan approval to disbursement).

Makes financial planning easier

Being able to organise their budget according to the loan amount specified in the sanction letter as well as staying focused on their property search is made possible by having a pre-approved DMI housing finance loan offer. Following evaluation of the LTV ratio and down payment need, it is simpler to plan your budget for your ideal property when you have a clear understanding of the authorised IDFC home loan amount.

Disadvantages of a pre-approved mortgage

Letters of sanction have a finite lifespan.

When you are looking for a house that is suitable for your housing loan, make sure that you keep in mind that the sanction letter that is provided by the lender is only valid for a limited duration, which is often anywhere from two to six months. If the buyer of the house does not complete the purchase of the property within the specified time frame, the lender will need to reevaluate the loan offer and make any necessary adjustments

Payment is not certain always

The home buyer must promptly choose and finalise a property within the sanction letter’s validity period in order for the pre-approved housing loan to be disbursed. If the lender authorises the property after doing legal checks and an evaluation, the loan disbursal will go smoothly. shopmagazon.com But if the borrower’s ability to make payments worsens during this time or if the chosen property has problems, including unclear property titles, and cannot meet the lender’s requirements, the pre-approved loan’s disbursement may be delayed, forcing the buyer to choose another home.

Loan conditions may alter.

At the time of disbursal, adjustments may be made to the loan terms, including the relevant interest rate, loan amount, tenure, and associated EMI listed in the pre-approved DMI housing finance loan offer. At the time of loan disbursement, the precise loan terms would be negotiated. For instance, the interest rates might have changed by the time you decide on a property within the validity of the sanction letter, meaning that the interest rate actually charged or applicable to your pre-approved loan may differ from the one specified in the given sanction letter.

The lender would determine the final loan amount for disbursal after verifying the project’s legal and technical validity, the type of property, and in accordance with the required LTV ratio and the applicant’s down payment contribution because the pre-approved housing loan is typically offered prior to the finalisation of the property.

Conclusion

There is no denying that preapproved mortgages have a unique set of advantages. These loans are definitely something to take into consideration because they offer a greater range of bargaining options with builders and sellers due to the existence of a lender pre-approval list and swift loan processing. But if they are viewed as a complete product for something as significant as taking out a IDFC home loan, they become less profitable due to their constraints including a short validity period for the offer, the potential of terms changing, and the lack of a guarantee of disbursement.

So, after analysing everything, the decision is entirely up to the eligible consumer. The potential home buyer may accept the pre-approved home loan if it fits their financial situation, and the lender providing the pre-approved housing loan will take care of other criteria like location, interest rate, duration, etc.

If not, feel free to do your own research and apply to an appropriate lender when you’re ready.

Make sure you are financially prepared to accept the loan when provided before accepting a pre-approval for a house loan. Avoid agreeing to something only to accept the offer of IDFC home loan even if being given as pre approved.. Recall that you are responsible for paying the EMIs! So take care.