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Home Loan Eligibility

Yet to Identify Property

Even if you are yet to identify the property that you intend to purchase, it is a good idea to get a pre-approval on your home loan. This would ensure that when you find an opportunity to buy the right property at the right time, you don't miss out on a great deal because you are struggling to arrange for your loan disbursement

For pre-approval on your home loan, only two things matter: what the bank thinks of your ability to repay the loan and what the bank thinks of your willingness to repay the loan

Unless you earn a salary in cash, it is fairly straight-forward for a bank to assess ability to pay. Bank statements and Income Tax Returns are usually sufficient for the bank to assess the future income earning potential and hence the ability to repay your loan.

Willingness to repay is normally assessed based on your track record - that is your credit history. Had you taken a loan in the past and were you prompt in your EMI payments? Have you been regularly paying your credit card outstandings on time? Through credit bureaus, banks have access to all these details about you.

Property already identified

A pre-approval on your home loan is always granted on a "subject to" basis. In other words, it is conditional. If you have a pre-approval, to be able to get the loan amount disbursed, you will need to fulfill the conditions. This would only be possible once you identify the property and are able to provide the related property documents.

If you have already identified your property before approaching the bank, the process followed will be a comprehensive approval including checks on your ability to repay, your willingness to repay and the quality of your potential property rights (as established from the relevant property documents).

Ideally, since you are making a property purchase, it is in your interest to consult a lawyer yourself to advice you on the quality of property rights you will own after the transaction.

And when you borrow from a bank, it is also in the bank's interest to assess the quality of the property rights. For a bank, a home loan is a risk that is secured by property rights as a collateral. Hence, the bank would want to assure itself that the property you wish to purchase has no encumberances. Often, such an assessment would require the bank to seek legal advice. In case your property is in large projects, there is a good chance that the bank has already done this assessment in a past case - and this will save you time.