What is Pre-Approval?
A pre-approved home loan means that the lender has already concluded that the borrower is able to repay their home loan with interest. The lender has examined the income and the expenses of the borrower to get an approximate idea of their ability to repay a loan. Based on this information, the lender decides in advance whether or not to provide a loan.
After the bank approves an application, it will provide the borrower with a letter specifying the loan amount and confirming the pre-approval.
Note that a pre-approved loan is only valid for a certain period of time. If the loan recipient does not purchase their home within this period, they must reapply for pre-approval.
Advantages of Pre-Approval
Pre-approval has many advantages over a regular home loan:
- Simplified Choices: The choices while purchasing a new place are endless. You might like the one you saw today but still worry something better will pop-up tomorrow. Pre-approval gives you a clear budget and simplifies your options. A clear pre-approved budget outline helps you assess and narrow down your options.
- Save Time: Time is the most precious thing nowadays. If you’re knowledgeable about the time frame in which you must replay your loan, information you’ll get via pre-approval, you’ll definitely do better making your housing choices. There’s also a chance you’ll save time looking, because sellers will have confidence in your officers.
- Better Chances for Negotiation: Getting a property for the best price is every buyer’s main goal. Having the bank’s letters in your hands is a strong plus point for you during price negotiations. If they are reassured that you can definitely pay the entirety of your loan, the owners are more likely to agree to adjust a price.
- Provide Confidence: It’s easier to be confident when you know you have the means to pursue your goals. A letter of pre-approval is an assurance to you as well as the seller that you’ve been verified by the bank and are capable of purchasing the property.
A pre-approved home loan provides satisfaction and confidence to both the buyer and the seller. It helps home buyers get the best value for their money and gives the important information about interest rates.
If you can get pre-approved, it’s always a good idea. Pre-approval provides both assurance and practical information about the loan amount and repay rates.