Pre Approved Home Loan - Explained in Hindi - YouTube

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Namashkar, my name is Mukul and welcome to Asset Yogi

where we unlock the knowledge of real estate and finance

Let's say you want to buy a property and you want to take a home loan for that

Then you have a pre-approval option in which you can get a home loan approved before even buying a property

So what is a pre-approved home loan and what are its advantages?

and what are its disadvantages

With that, we'll see the process of a pre-approved loan

So stay tuned with this video till the end so that you understand the concept clearly

Let's switch to the blackboard

Firstly, let's understand what is a pre-approved home loan?

It is basically an in-principal approval from the bank

You get an offer letter of the loan that you get approved before buying a property

That we call in-principal offer letter

The in-principal approval depends on your credit score

and also depends on your financial capacity that how much pre-approved loan will you get

The bank check your income to calculate the financial capacity

your age, if you've taken any other loans then your payback history

Other loans and liabilities

Your financial capacity depends on these and whatever your EMI paying capacity is

Let me write here

According to that, your loan amount is decided

I made a video on how the loan eligibility is calculated

It is on home loan eligibility so please watch that video

In that video, I explained in detail how loan eligibility is calculated and I gave a calculator also

So do watch that video

With that, watch my video in which I explained the complete home loan process

So you have to complete half of the process there also that is the documentation

I've explained in that video so do watch that video

that what all documents are required when you'll apply for a pre-approved home loan

When you apply for a pre-approved home loan, you have to give processing fees

After that when you receive the offer letter, all these details are mentioned in that

Your sanctioned loan amount is mentioned

Let's say you want to buy a house whose value is Rs 50 lakhs

Your budget is Rs 50 lakhs

So generally, you have to pay 20% on your own so let's consider a downpayment of Rs 10 lakhs

So you require a maximum of Rs 40 lakhs and this will be your loan amount

So you will apply for a pre-approval of Rs 40 lakhs

Let's say your credit score is more than 750 and there is no problem in CIBIL score

Your financial capacity is also sound and there is no problem with that as well

And let's say the Rs 40 lakhs loan is also sanctioned

So it will be mentioned in the details that Rs 40 lakhs loan is santioned

and after that, your rate of interest will be mentioned

So the point to note is that the pre-approval is only on the floating interest rate

If you want fixed interest rates then you won't get a pre-approval

For that, you have to go with the regular loan

So let's say you're getting an interest rate of 8.25% in floating interest rate

So that will be mentioned here

Tenure of loan, let's say you borrowed for 20 years then that will be mentioned

Your estimated EMI is mentioned here

For 20 years, EMI for Rs 40 lakhs loan is around Rs 34,000

So Rs 34,000 EMI will be mentioned here. I am not writing the exact amount, it's just an approximation

After that, there is an important point that your validity is also mentioned in the pre-approved home loan

For how many days the offer letter is valid

It is defined differently for different banks

Anything could be allowed from 1 to 6 months

So you should try for the maximum validity of 6 months because

sometimes property cannot be finalised in a month

So try for the maximum validity possible

Besides this, all the other terms and conditions are written

When your Rs 40 lakhs loan is sanctioned

There is no guarantee that you will get exactly this much

It depends. Let's say the interest rate increased later

and your paying capacity decreases or you want to change your tenure for 10 years

So according to your EMI capacity, your loan amount may change

So all these terms may change

If the interest rate changes in future then it can also change

So there's no guarantee and this is in-principal approval as we saw

Now let's see its benefits and limitations

What are the benefits of a pre-approved home loan?

One, you can focus on property search and you don't have to worry about the loan

In a way, you already have loan approval

Secondly, when you will do the loan process in future, it will be very fast

and your documentation will be very limited

So limited documentation will be there whenever you'll apply finally

The 3rd benefit is the lower interest rate

If you're getting 8.35% interest in the market

then you may get 8.25% in pre-approved home loan

So many banks provide discounts on the interest rates so you should negotiate for that whenever you're applying for pre-approval

After that, the most important point is a better deal

How a better deal is there?

Let's say you've finalised a property

And your loan doesn't get approved

Then that deal would not get wasted if you have a pre-approved loan

It happens many times that you fixed a deal but the loan doesn't got approved or got delayed

So someone else bought that property

And your negotiation power is always better if you have your finances ready

If you will sit with the money in front of anyone then you can easily fix a deal

You can make an offer immediately and pay in advance if your finances are tied up

But if your loan is not approved, you would ask for more time and take time in paying the advance

So you may miss that deal

This is a huge benefit of pre-approval

With that, there are some limitations as well so let's see what are the limitations

One, as we discussed there is no guarantee and this is only an in-principal approval

If in future, the interest rates changes or your loan tenure gets reduced then your loan amount may get changed

Apart from that, if any problem arises with your property documents

If any 3rd party claims or any court case comes in then also loan would not get approved

So this is a limitation of pre-approved home loan

Also, your credit gets blocked

Credit block means, let's say your maximum Rs 40 lakhs loan got approved

So in a way, your credit is blocked

Let's say in future, you want to buy a vehicle worth Rs 10 lakhs immediately and the requirement is Rs 10 lakhs

Then you cannot take this loan at that time, right!

So if you want a pre-approved loan, make sure that you don't need any other loan for the next 3-4 months

After that, a processing fee is applied. This may be a drawback because let's say

the deal doesnt worked

If it is valid for 3 months and if the validity period gets over, you have to pay the fee again

There is one more limitation that you get an option of floating interest rate only and you don't get an option for fixed interest rate

and psychological pressure is build-up to close the deal

Let's say you paid the processing fee

So you would try to close the deal within 3-4 months

So it may happen that you end up giving more money

So what should you do in such a case?

Firstly, you should shortlist 3-4 properties before applying for a pre-approved home loan

After that, try for the maximum validity

Maximum validity means, I would say if it is possible for 6 months then go for it

And negotiate for minimum processing fees and interest rates

The interest rates are also negotiable in all the banks

You can easily negotiate for 0.1-0.15%

and you should try for the interest rate they are offering to their best customer

And you can also negotiate the processing fees easily

The banks generally charge 0.25-1%

So it could be closed between 0.25-0.5% easily

You should try for the minimum processing fees

If 0.25% is possible with that bank then you should go with that

So I think I covered all the major points on pre-approved home loan

So whenever you will apply for a pre-approved home loan, keep all these points in mind

So that's it in this video

I really enjoyed making this video

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