Pre-approved home loans India
For a house-hunter, next to zeroing in on the dream home, obtaining a home loan is the toughest hurdle that he or she has to cross. How would you like it if you have the loan in your pocket even before you approach the developer to negotiate?
Banks and housing finance companies are now offering home-seekers pre-approved home loans or loans for property that have not been identified. While it sounds like an inviting proposition, there may be some not-so-exciting features that you should need to be aware of.
The procedure for a pre-approved loan is largely similar to a regular home loan application — you need to submit the documents asked for to the bank along with the processing fee.
These will include — depending on whether the applicant is a salaried individual , self-employed professional or entrepreneur — identity and residence proofs, the latest salary slip, Form 16, past six months’ bank statement, past three years’ income-tax returns (self and business) as well as profit/loss statements and balance sheet, certificate and proof of business existence and so on. However, a desirable income level is not the only criterion.
Your repayment capacity, too, is a critical parameter. “We take into account the loan-seeker’s income-toobligation ratio. Hypothetically, if the applicant’s income is Rs 1 lakh, his total repayment outgo should not be more than Rs 55,000-60 ,000,” explains Kamlesh Rao, executive vice-president , retail assets, Kotak Mahindra Bank.
Even after your loan is sanctioned, the disbursal will take place only after you identify a property that passes the lender’s due diligence test. “There is no typical period within which the loanseeker is required to avail of the disbursement. However, we keep the file open for six months and if the applicant does not act within this period, we send reminders to the individual,” informs an HDFC spokesperson. The validity period varies with each bank.
For instance, State Bank of India, which has been publicising this facility of late, requires the borrower to identify the property within 60 days for the sanction to be valid. “Interest rate, though, cannot be locked-in — the rate prevalent at the time of disbursal will be the effective rate,” says the HDFC spokesperson. Adds Kotak Mahindra’s Rao: “In the case of a sanction, the validity could range from 1-3 months.
We, at Kotak, prefer a period of one month.” While the interest rate may change at the time of disbursal, the spread over the bank’s base rate will not be altered for the borrower, unless a significant period of time has elapsed.
Buying a property typically involves a mountain of paperwork — with the builder and, later, with the lender. Availing of a pre-approved loan would mean that at least one part of it is taken care of. “The borrower’s creditworthiness is established already and this helps in negotiating on rates with the builders.
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