September 05, 2014
Signing a Contract to buy a property is an exciting moment, whether the property is for a home or an investment. It can also be a stressful time because it commits you to finding a lot of money! Very few people have that money readily available so most are relying on a bank or other lender to help out. One way to reduce the stress is to obtain ‘pre-approval of finance’ before signing a Contract. It isn’t mandatory but is strongly recommended.
It is very important to understand pre-approval does not guarantee your finance. Your chosen lender will issue a letter confirming that some assessment has been completed to their satisfaction, and your requested loan amount will be available if you meet all of the outstanding conditions.
This raises an interesting point because lenders do a varying level of assessment before issuing the pre-approval letter. A long list of ‘outstanding conditions’ is an indication little assessment has been done, so the pre-approval has little value to you. An ideal pre-approval will have determined that:
- Your credit history is acceptable;
- You can afford repayments on the proposed loan;
- You have enough equity (deposit)
The outstanding conditions of such an ideal pre-approval will only relate to the property, such as:
- You must supply the signed Contract for the property;
- The property must be acceptable to the lender.
With pre-approval in hand the next step is for you to find the property! It is your responsibility to ensure it will be acceptable. Ideally you will attempt to do this before making an offer or attending an auction. These steps aren’t mandatory but we suggest you:
- Research local property prices;
- Arrange a building inspection (this could be a condition of a private sale offer but not a condition at auction);
- Ask your legal representative to review the Contract and Section 32;
- Discuss the property with us.
Why you need to call us
We can obtain pre-approval for you. We also have additional information to help you identify an acceptable property. For instance we offer our customers a reasonable number of Residex property reports with actual sales data for the local area.