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Tata Capital > Blog > Loan for Home > How Long a Home Loan Pre-approval is Valid for?

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How Long a Home Loan Pre-approval is Valid for?

How Long a Home Loan Pre-approval is Valid for?

You have your eyes on a house, approach a lender with all the necessary home loan documents required, and apply for a home loan. Unfortunately, by the time your lender’s document verification process is done, the house is already sold to someone else. This is pretty common in a competitive market. 

This is where a pre-approved home loan can save the day. A pre-approved housing loan is when your lender provisionally sanctions a particular amount to you based on the assessment of your financial standing, repayment record, credit history, age, etc. Since only the borrower’s profile is scrutinised, pre-approval for a home loan can be obtained quickly. 

Benefits of a pre-approved home loan

1. With pre-approval, your home loan will be processed much quicker.

2. Lenders may offer a concession on the interest rate for your loan.

3. Pre-approval shows your seller how serious you are about buying a home, giving you the extra edge.

4. It can help you negotiate prices with the seller.

Important features of a pre-approved housing loan

1. Loan guarantee

 A pre-approval does not guarantee a loan sanction. Once you finalise the property, you must submit the required property documents. Only when the home’s legal and valuation aspects are satisfactory will your home loan be fully sanctioned. Even then, the lender may reject the loan application despite the pre-approval.

2. Interest rate

When you get pre-approval, the lender may offer you the loan at a lower interest rate. 

3. Validity

A pre-approval is valid only for a specific period, usually between 2-6 months, based on the lender.

4. Credit limit

Though the sanction is only provisional, your credit limit will reflect the pre-approved loan amount.

5. Processing

Since the lender only assesses your risk profile, you can obtain pre-approval quickly, sometimes even in a day. However, you will have to bear a non-refundable processing fee.

Why should you get pre-approval?

There are many benefits of a pre-approved home loan. In today’s competitive real estate market, a pre-approval makes you stand out. It shows your commitment. Plus, sellers tend to prefer buyers with pre-approvals. Some sellers may even demand it to ensure you have the means to afford the house. It also makes loan processing easier once you choose the property. Moreover, with a pre-approval letter, you know exactly how much you can expect from your lender, so you can plan your budget accordingly.

Best way to get pre-approved for a mortgage

The best way to get pre-approved for a mortgage is to approach your lender and submit all the necessary documents for pre-approval. Some of them include-

1. ID proof

2. Address proof

3. Proof of employment

4. Salary slips for the last 3 months

5. Bank account statements for the last 6 months

6. Loan account statements for the last year

7. IT returns or Form 16 from the last two years

The lender will process the documents and reject or pre-approve your application with conditions. This is the best way to get pre-approved for a mortgage.

Things to keep in mind while getting a pre-approval

The benefits of a pre-approved home loan are numerous, but even with the best pre-approval home loan, there are some factors to look out for:

1. Credit score

Every hard enquiry on your credit history can affect your credit score. When you apply for pre-approval, financial institutions check your credit history thoroughly, causing your credit score to fall slightly.

2. Subjective validity

Even the best pre-approval home loan will be valid only for fully-approved and authorised properties. Lenders will not sanction a home loan for a property with questionable government approvals or legal disputes. Also, your pre-approval is valid only for a certain amount of time. If this time lapses, you need to get another pre-approval.

3. Interest rate fixing

When you get a pre-approval and submit the property documents later, the loan sanctioned to you may be at the interest rate decided at the time of pre-approval. So even if the rates decrease between the pre-approval and actual sanction, you may not get its benefit.

To conclude

Applying for a home loan can seem overwhelming. But with a pre-approval, you can break the process into faster and more manageable chunks, at least documentation-wise. Moreover, pre-approvals are almost considered compulsory in competitive real estate markets, as sellers don’t want to waste time with people who are “just looking”. 

So if you’re serious about making your dream home a reality, now’s the time to consider a pre-approval from a financial institution. But remember that a pre-approval can be expensive and affect your credit limit, so you must not get it from many lenders. So choose your lender wisely, get their pre-approval, and stick with them for the home loan to get maximum benefits. At Tata Capital, we offer flexible home loans that meet your every need at attractive interest rates. So apply for a home loan today to get the best deals in the market!

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