Myths about pre-approval home loans

Nowadays there are numerous misconceptions and myths about pre-approval home loans in the market. Now that the rate of interest has gone down for the home loan, EMIs or equated monthly installments have become one of the main topics for discussion for home buyers. And with a lot of misconceptions so entranced in today’s market a lot of applicants ended up falling prey to them easily if they do not understand the facts.

Here are some of the misconceptions attached to pre-approval of a home loan:-

1. A high rate of interest means inflated monthly installments:- The first and immediate reaction of many borrowers when they are charged a higher rate of interest with their home loan is that they will have to pay a high amount of monthly installments which will result in rising in their financial problems. Factors like the age of the borrower, the income of the applicant, etc also determined the interest rate. For instance, if you apply for a home loan at a young age and have a good income, the interest rate will be reduced for you by the lender. So, you do not have to worry about high EMIs anymore.

2. You will certainly get the loan:- Bank have to employ a good deal of work to scan all those documents to reach a number they will be willing to lend you for a future home purchase. They would certainly do all efforts to turn you into a customer from a prospective customer.

3. Banks do not consider one’s status of employment:- Another common myth. Banks are extremely thoughtful and considerate about borrowers’ employment status. You must mention your retirement, employment status, unemployed phase, etc. The home loans agreement does have a clause that states if the applicant is unable to clear the home loan debt, his/her present employer will be liable to pay for the outstanding home loan.

4. You will have to take the loan once it is pre-approved:- The most essential and common myth is that the borrower has to compulsorily take the loan once it is pre-approved. This does not make any sense from the perspective of the lender as well as the borrower. If you are unable to find any property within the timeline set by the lender, the validity of the pre-approval will expire. Similarly, if there is any change in your financial status, the bank might drop the offer.

5. Interest rates are the same as regular home loans:- The final myth related to pre-approved home loans is regarding the interest rates. Mostly, the pre-approved loan comes with a floating rate of interest. So, in case of the interest dip, you get no benefit at all.

So, are there any benefits of pre-approved home loans? Yes, sound and better financial planning are the most essential benefit of pre-approved home loans. Once you have the home loan amount approved, you can be sure about the budget for buying a house.

Home loans are excellent financial instruments that help people buy their property. The above myths and misconceptions will help clear the negativity surrounding home loans and allow you to buy your dream house without putting too much strain on your finances.