04 January 2011
Home Loan Preapproval and the Borrower
The meaning of preapproval is a situation where the lender is assured that the borrower has certain amount of assets and stands a financial capacity for repayment of the new loan that is to be taken. Home loan preapproval has many advantages for the borrower as it helps the lender and seller of the flat to know the financial standing of the client.
Here the borrower has documents of salary of own of also other working members in the family. There are other assets like shares, bonds and fixed deposits that have a certain monetary value till date. As also other assets like other property and carapplying for a home loan,repayment capacity,lender,loan approval also have a financial value. Thus a borrower before applying for a home loan and searching for a home can discuss with the lender their financial standing and loan repayment capacity. Here they can come up to an amount that the borrower has at hand every month that can be used for the repayment of the new loan. These documents after consideration by the lender are scrutinized and then a loan approval letter can be got. This document is an indicator that the borrower has the capacity to purchase the selected property and has the capacity to repay the loan. This is termed as the preapproval letter and is an indirect assurance for the seller that the borrower will get the loan approved and it is just a matter of time for the other procedures of loan approval.
This loan approval letter can be taken at any place to purchase a home and it is an indicator that the loan is under processing and will be approved. However one has to understand that this is not ‘the loan’. It is just a preapproval letter but this does not guarantee that the loan will be 100% approved.