Home Loan Preapproval and Bank Procedures

Nowadays it is being seen that many buyers bring home loans preapproval letters from  a bank. This assures the seller that the customer is in the position of buying the flat and has the financial capacity. Many banks give preapproval letters but this is a tedious process and this is valid only for a certain period. The buyer has to purchase a flat in the given period maybe six months after getting the letter of preapproval from the bank.

For this letter banks require a lot of information, mainly regarding finance in the family. Income tax returns of the past years have to be submitted. Your bank account statements that show your inputs and out going amounts are also cross checked with the bank in which you have an account. Salary slips of the past few months are checked for proof of salary. Even the identity proof of an individual like pan card and telephone bills for address proof also are considered. The credit card history also will come under scrutiny by the bank officers for understanding the spending habits and any cases of default.

When all the documents are scrutinized then the bank will give a document of preapproval and here the term of validity of the document s also mentioned. Mostly it is valid for six months after the preapproval date. Some banks also mention at what interest rate they are offering the loan. This is an assurance for the seller of the flat that the buyer is a serious buyer and is interested in purchasing the flat. Also since the validity of this letter is for six months the seller is also willing to negotiate on the flat rate and total amount for the serious buyer.

Though the preapproval letter is an assurance that your loan will be approved but it cannot be guaranteed and one has to always keep other options also before going in for buying a home. It is always better to have few final lists of banks and lending institutions at hand to select from. Several banks also charge a preapproval letter fee and some also mention interest rate with which the loan is being approved.

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Credit Card History and Credit Information Report in Home Loans

Credit information report is one of the most important criteria for approval of a home loan. Easy spending power with the consumer has led to many people using many different credit cards. Though they end up paying more as interest the consumer is happy to purchase at their own free will and then pay later at the end of the month. CIR as it is termed is the most important criteria for home loan approval.

The history of the client’s financial dealings that is salary and spending amount indicates their financial status. If both spouses are working than both their salary amount can be considered. Take away home pay and their monthly usage of credit card indicates how much expenses are incurred and how much remains as savings amount. This is very important by the borrower to plan their credit card history before hand and later apply for a home loan for better chances of approval. Let us note some important points for increasing our chances positively for loan approval.

1) Plan in advance before applying for a loan. Keep watch for your credit card usage and keep the amount low. The CIR must reflect your financial status.

2) Your history of repayment of loans on time will definitely be a plus point for the lender.

3) Never out spend your credit card amount. Always be in limits and your expenses must be less than the total amount available for credit. The lender will consider that you have to have a substantial balance for repayment of the newly applied loan without any hassles.

4) Always keep payments on time. Your monthly electricity, telephone and credit cards bills must always be paid on time. This shows your financial capacity and habit of paying on time.

5) Credit card usage must be limited to certain amount, in fact if the usage is less the better chances of your loan approval. This assures the lender that you can manage your expenses without credit.

Thus for better chances of loan approval and avoiding the rejection of your loan application it is better to keep a watch at your credit card history.

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