While buying a new home is an exciting experience, it can also prove very stressful, especially if you are competing for your dream home against a lot of other potential buyers.
Thankfully, there are ways for you to get yourself ahead of the pack and lift your chances of securing that dream property – and it all starts with loan pre-approval.
Loan pre-approval provides you with a conditional approval of a loan amount. Generally speaking, it’s based on an assessment of your individual circumstances, needs and ability to repay the loan.
A loan pre-approval will provide you with some clarity around the amount you can borrow, and therefore, what you may be able to spend on a property. As a result, it will stop you from looking at properties that are well outside of your price range.
Further, loan pre-approval will put you in a stronger position to negotiate with a vendor or bid at auction.
It’s important to keep in mind, that pre-approvals are usually a limited time offer usually for a period of three to six months, depending on the lender.
In order to help yourself prepare for pre-approval, there are a few things you should do.
Organise your deposit: As a home buyer, you generally need a deposit of at least 5% of the purchase price, plus upfront costs. You will also need to show evidence of a genuine savings plan, such as bank statements that illustrate a savings strategy for at least three and up to six consecutive months. Pleasingly, some lenders now consider rent payments as evidence of genuine savings.
Check your credit history: Grey areas in your credit history, such as bill defaults and/or prior loan/credit applications can affect your loan pre-approval application. It’s important to resolve any credit impairments with the relevant credit provider before you apply for finance. Your local broker can help you identify what credit defaults (if any) that you may have and work with you to rectify the situation.
Prepare your paperwork: Gather evidence of your employment, income, assets, liabilities and expenses. You’ll also need to provide your driver’s license or other ID, recent pay slips, tax returns and bank statements. Having everything at arm’s reach will streamline this process.
If you would like any more information on pre-approvals or would to get yours in order, contact your Mortgage Choice broker.