What is the Concept of Prequalifying and Pre-Approved Home Loans?

Prequalifying is a home loan tool or program allowing a homebuyer to get an idea if they can afford a particular property. It also helps them assess their eligibility for a home loan. In addition, pre-qualification can also be instrumental in revealing a homebuyer’s financial stability for EMI payments and details regarding the loan tenure.

What is the difference between pre-qualification and pre-approved for a home loan?   

It is best to think of a prequalifying home loan as a first step towards pre-approval. Pre-qualification involves a homebuyer giving regular information about their income, existing EMIs or loans, credit history, and more. The practice also helps address problems, such as a clear picture of your income, current debts, and monthly outgoings. 

In contrast, pre-approval requires a detailed exchange of information for an exhaustive check on a homebuyer’s credit history and creditworthiness to avail of a home loan. Having a precise picture of which property you can afford, home loan pre-approval will make your dreams of owning a home come true. 

To get pre-approved, you will need the following things: 

  1. Documents to prove homeownership like encumbrance certificate and home title
  2. Paystub of employer for the past three months or a letter from your employer stating that you are still employed
  3. Any other documents needed by the home finance company: pay stubs, bank statements, investment portfolio documentation, etc. 
  4. Details like credit score and information about your credit history 

How to prequalify for a home loan? 

It is advisable to check your home loan eligibility using a home loan calculator. After you decide the home loan amount and tenure, the next step is home loan pre-approval. According to home loan experts, once you get prequalified for a home mortgage or home purchase loan, it can help set expectations and look for your dream home. 

How do pre-approved home loans benefit a homebuyer? 

Pre-approved home loans can be pivotal in steering purchase negotiations. It also helps home buyers negotiate on closing costs, down payment, assessing the EMI payments, tenure, creditworthiness, and more. 

More importantly, this practice saves you from the tedious process and the hassle of looking for a home loan after finalising a property. It is also important to note that pre-qualification or pre-approved does not guarantee that you will receive a home loan. It is merely an exchange between you and a bank executive. 

But, when home buyers get pre-approved for home loans, the home seller is assured that home buyers have already passed the first hurdle in financing the property and are qualified for a home loan. As the real estate market is incredibly competitive, both parties can close the deal and exchange offers as early as possible. 

How to get the best rates on your home loan? 

Seeking a pre-approval on home loans help home buyers to get the best mortgage rates and home loan interest rates. Homebuyers who are pre-approved can negotiate with home sellers on a better price or lower home property taxes to close the home loan quicker, instead of getting late in the closing date. In addition, they have access to the bank executive and home loan customer care number to get in touch with the respected lender as quickly as possible. 

In conclusion, homebuyers should not settle for anything that is not optimum. It is best to partner with a reputed and trustworthy lender for seeking a home loan.

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