Kishor Pate, CMD, Amit Enterprises Housing Ltd. | Mumbai | January 16, 2017 09:37 IST
This is especially true if one is a first-time home buyer. Obviously, the most challenging and confusing part of the home buying process is the financials. Confusion here can relate to which the best lending institution is, what type of loan is the best and what the conditions are, and what size of home loan one can comfortably pay off over the years of tenure.
A self-owned home is the dream of every Indian, and all of us want to see ourselves being able to go in for a home one day. When that day comes, the last thing we want is any reason for delay or insecurity to cloud the decision. This is especially true if one is a first-time home buyer. Obviously, the most challenging and confusing part of the home buying process is the financials.
Confusion here can relate to which the best lending institution is, what type of loan is the best and what the conditions are, and what size of home loan one can comfortably pay off over the years of tenure. However, one of the biggest worries for a first-time home buyer with regards to a home loan is how long one needs to wait for its approval.
In this scenario, the best bet for a first-time home buyer is to apply for a pre-approved home loan. Getting a pre-approved loan means that you have already dealt with one of the trickiest parts of the purchase process, and can now focus your time and attention on finding the best property options available. Pre-approved loans also give you an upper hand when you are at the negotiation table with a developer.
Understanding the difference between loan pre-approval and pre-qualification
Pre-approval and pre-qualification of home loans are completely different things. Pre-qualification is more like an educated guess on the part of the bank or lending institution about how big a loan you qualify for. This estimate or loan eligibility is based on your current earning power, credit score, financial history, and so on. A pre-approved loan, on the other hand, is a written guarantee by the lender that you have secured a loan.
To grant a pre-approval certificate, loan officers will conduct an employment, remuneration and ‘credit worthiness’ check. This will include collecting all past financial data like loan of credit card repayment history, credit card statements, disposable income, current debts, and more. Generally, all of this would be done using special software.
How to get a pre-approved home loan
The first step towards obtaining a pre-approved loan is finding a lending agency you can trust. It might be one that you know, one that an acquaintance works for, or one that has been reliably referred to you. While any lender would conduct an extensive credit check, you must find one that is not only willing to lend to you but also has a good reputation in the market.
Another important thing to check is the rate of interest that will be charged on your home loan. The best agencies will come up with competitive rates and also offer helpful customer service. In these cases, the loan officer will actively help you out to get the pre-approval, and discuss the type of settlement you would be eligible for given your salary, investments, tax returns, debts, credit score, etc.
How does a letter of pre-approval help?
An important advantage of a pre-approved loan is that you know your spending limit. You are precisely aware of what kind of property you should be searching for. This eliminates from your search properties that you are not eligible for. Secondly, with a pre-approval letter, you will not have to wait for many of the formalities of property purchase once you come across a suitable option. You have the advantage of being immediately able to book the property using the pre-approval letter. A pre-approved loans also gives you a lot of credibility with builders/promoters, and increases your negotiation power.
Getting a pre-approved loan is the easiest way to buy your dream home in the current market scenario. It is not only assuring but also keeps you within the limits of your affordability – and makes you a highly credible buyer whom any seller will take seriously and extend the best possible deal to. The approval should give you an opportunity to make a choice at leisure, but should not lead to the trap of landing in a circle of indecision and complacency. The pre-approved home loan should be a tool which lets you make a decision when you find a house of your and your family’s choice, and to act on it.
The author, Kishor Pate is CMD, Amit Enterprises Housing Ltd.
Anil Pharande | Updated 18 Mar 2015, 23:44:19 | India TV News
Home buyers, and especially first-time buyers, would like to be in the best position to make their purchase once they have identified their dream home. The most challenging aspect of home ownership is invariably financing. Questions like which lending institution to approach, what loans should be applied for, how much loan to be applied for and how much time will it take for approval need to be answered.
The best ‘be prepared’ move on this front is to become pre-approved for a home loan. Doing so means that this tricky and time-consuming aspect of home purchase has already been dealt with, and that one can enter the market focused squarely on the best options. Getting pre-approved also puts you in the strongest possible place when it comes to negotiating the best deal. 1.
What is the difference between loan pre-qualification and pre-approval?
Pre-qualification for a home loan is more or less like an educated estimate provided by the lending company. They will be letting you know the type of loan you could qualify for, and the maximum amount. The estimate is usually based on your financial history, loan eligibility and buying power. A pre-approval, on the other hand, is a written confirmation by the lender.
Before handing over the pre-approval certificate, loan officers will completely access your employment and remuneration information and do a complete ‘credit-worthiness’ check. This involves collecting all the data related to your past and current debts, repayment history, disposable income, credit card record, etc. and running it through software that will calculate whether you could be a likely candidate for approval.
How to secure a pre-approved home loan?
While seeking to become pre-approved, it is always best to approach a lending company that you know or can be referred to by a friend, colleague or family member. The lender needs have the assurance that you are a credible borrower. However, do not stop searching after you have met the first possible lender.
Ask around and look for the lending institutions that that provide the most competitive interest rates and are known for their helpful customer service. The loan officer from the identified lending institute will then pay you a visit and help you streamline your financial statements so that you become ready to discuss your bank statements, investments, holdings, salary slips, income tax returns and other information related to your finances. This basically starts the process which will end with you becoming a pre-approved borrower.
What good will a letter of pre-approval do?
Firstly, a pre-approval letter lets you know the exact budget range you should be searching in. This helps you stay in sync with your financial reality and keeps you from allowing your focus to stray to properties that you cannot afford. Secondly, having a pre-approval letter means that you can grab an offer immediately when it comes across and is in your budget range.
The letter states that the finances are ready when you choose to ask for them. Important Note: it is highly advisable to work with lenders who have the ability to provide customized pre-approval letters, inclusive of the maximum purchase price. Sellers could get greedy if they see a greater loan amount than their quote.
Getting pre-approved for a home loan is a crucial step that can put you in the best possible position in the home buying process. It will give you both peace of mind and keep you focused on what what to look for and what to avoid in terms of affordability.
Anil Pharande is Chairman of Pharande Spaces
Source : http://goo.gl/DcIOwO