Can you get a home loan without finalising a property? Here's what you need to know

Jaideep was thrilled after his appraisal brought a well-deserved promotion, a generous bonus, and overdue arrears. His dream of owning a home felt closer than ever. However, there was one small issue: he hadn’t found the perfect property yet. Could he secure a home loan without having a specific house in mind?

The answer, as it turned out, was yes. Banks and financial institutions normally offer a pre-approved home loan. It is essentially a stamp of approval on your financial capability to secure a mortgage. With a pre-approved loan in hand, Jaideep could confidently look for a house. Now, with a pre-approved home loan, he knew exactly how much he could afford, giving him a clear budget.

There were other benefits too. A pre-approved loan often comes with a lock-in period for interest rates, protecting Jaideep from potential hikes. Plus, when he did find "the one," the loan process would be significantly faster, as his financial profile was already assessed.

However, it wasn't without its caveats. The pre-approval is usually valid for a specific period, specifically for three to six months. And while it doesn’t guarantee final loan approval, it’s a strong indicator of eligibility.

Pankaj Gadgil, MD&CEO, Aditya Birla Housing Finance, said, "Property documents are a must for securing a home loan. However, individuals in the process of house hunting might consider a smarter alternative: obtaining a Pre-approved (PA) or Property not Identified (PNI) home loan sanction."

"A pre-approved home loan, also known as an in-principle sanction, is based on the applicant's income, creditworthiness, and financial position. This offer is typically sought before selecting a property and is valid for a limited period of approximately three months. During this period, the property choice must be finalized; otherwise, the applicant will need to have the loan application reappraised at a nominal cost by submitting the latest income documents to the lender," said Gadgil.

Gadgil added, "It's important to note that the terms of the pre-approved loan, such as the interest rate, equated monthly installments (EMIs), and tenure, may change by the time of disbursal. The final loan terms will be determined based on the property being funded and the prevailing interest rate scenario at that time."

Excited, Jaideep started his property search after getting clarity from an expert. With a clear financial roadmap, he was confident he’d find his dream home soon.