Personal Loan

What is a pre-approved loan offer? A detailed guide


Choosing the home of your dreams requires patience and time. You would likely look at a few options before finalising one. Just like finding the house of your choice could take time, getting loan approval for the house also takes time. The lender will have to consider and assess various aspects before sanctioning a loan, which could take a while. So, what happens to the home you choose? There is a possibility that you may lose the opportunity to buy a home due to a delay in payment. This is where a pre-approved loan can help you.

A pre-approved home loan, as the name suggests, is a loan that is approved before you finalise the property deal. The lender gives an in-principle approval for a loan based on your income, credit score, and financial position.

The pre-approval process is the same as the regular loan approval process, except you don’t have to send in any documents about the property.

The essential features of a pre-approved loan are:

A pre-approved home loan is essentially an in-principle approval based on your repayment capacity. 

The financial institution gives you a pre-approved loan offer after assessing your repayment capacity. The loan disbursal is based on you identifying a house within the given validity period. The property you choose for purchase should meet the legal and technical requirements of the lender. Even if you have a pre-approved loan, if the property is not as per the lender-accepted norms or does not have a clear title, they will not disburse the loan.

The pre-approved loan is valid for a specific period, usually 3 months.

Pre-approved loans are valid for a limited period, usually three months. To get the loan sanctioned, you must finalise the property within the given period. If you do not choose a property within three months, you can have your loan application reappraised; you will have to pay some costs and submit your latest income documents. 

The loan terms are finalised at the time of loan disbursement.

The actual terms for your pre-approved loan are fixed upon loan disbursal. The offer may have indicative conditions; however, the interest rate may change from when you get the approval to the actual loan sanction.

What are the benefits of a pre-approved loan?

A pre-approved loan offers the following benefits:

  1. Your search for a home is now more focused.

A glance at the listings for any property will tell you that you have a wide range to choose from, both in terms of property type and budget. You have a choice between apartments, independent homes, villas, gated communities, and standalone buildings, and the cost could be in the lakhs or crores. When you have a pre-approved loan, you know at least what price range to focus on. If you have a pre-approved loan for 80 lakhs, you know to look at properties around this range. 

  1. Loan disbursal is quicker and simpler.

When you have a pre-approved home loan, the lender completes a significant part of the loan verification process. The lender assesses your repayment capacity and also carries out the checks related to the KYC process. Once you have finalised the property, the lender will verify the property papers and perform due diligence on the property you have chosen. The sanction takes less time. If you have a small window in which you have to pay for your house, a pre-approved loan offers a lot of advantages.

  1. Better financial planning.

When you apply for a home loan, you are unsure about your eligibility. The lender could reject your application, or you could get a loan sanctioned for a lower amount than what you expected. This could derail your plans to buy a house.

A pre-approved loan helps you plan your finances better. You know how much you can borrow; this helps you estimate how much you would need as a down payment when you want to buy a house. You can plan your finances better, keeping in mind the approved loan amount, your savings, and the amount you wish to spend on purchasing a property.

  1. You can negotiate better.

A pre-approved loan gives you an edge in your negotiations with the lender as well as the seller of the house.

The lending institution has assessed your repayment capacity and creditworthiness and has found you fit to sanction a loan. This means you can get a loan from competitors at better terms, too. The lender will also view your application favourably and be willing to offer you a better deal. You get a loan at lower rates, plus you could get more favourable repayment terms with a pre-approved loan.

With a pre-approved home loan, you can get a better deal from the seller. The seller is assured of your intent and capacity to buy. They are convinced that you will get a loan sanction quickly and thus be able to pay them faster.

How to get a pre-approved home loan?

  1. You need to apply to the financial institution of your choice. You can do so online too. Piramal Finance also allows you to apply for a loan online.
  2. Along with your application, you will need to send proof of your identity, where you live, and how much money you make.
  3. The lender then verifies your repayment capacity based on the details and documents you submit. They also check your credit report to assess your creditworthiness.
  4. After the verification process, the financial institution will issue a loan approval letter that has the sanctioned loan amount and the applicable interest rate (the rate may change by the time of disbursal).
  5. Banks charge a non-refundable processing fee that is taken out of the loan amount if the borrower gets the money in the allotted time.


Though a pre-approved home loan is not a guarantee of loan disbursal, it offers some advantages. A pre-approved loan can aid your property search and also help you get a loan at better terms.

You get a better picture of your loan eligibility and can plan your finances better. So go ahead and get a loan approval if you plan to buy a house soon.