When it comes to buying a new home, almost everyone will be looking for a bank or lending institution to borrow money. How much money you can borrow will depend on your current savings (the amount saved and your savings pattern), your income, employment, any debt and your expenses. Obviously this amount will differ for every person, and the amount you can borrow will also differ between lenders. By getting a pre-approval in place you can confidently head out shopping for your new home.
So what exactly is a pre-approval? A pre-approval is a “conditional lending document”. It is an indicative approval of an amount the bank is willing to lend, with the condition that they will assess the property and purchase price before giving complete unconditional approval for the loan and releasing the funds.
A pre-approval loan application follows a very similar process to a full loan application. The lender will assess the borrowers individual circumstances and ability to repay the loan, then provide an amount they are willing to lend (this will always be subject to a full property valuation and potentially other conditions). The pre-approval is generally valid for three to six months depending on the lender, given that your financial circumstances remain unchanged.
Once you have your pre-approval in place, half the work is already done. Not only have all your details been submitted and approved by the bank of your choice, you are able to head out to the market with a very realistic picture of what you can afford. This knowledge will be able to narrow down the areas and types of houses you can afford, and you can spend your weekends at open inspections of houses that could very potentially be yours.
Once you think you’ve found “the one”, with a pre-approval in place, you are able to get to settlement much quicker, as the bank has already assessed you as the borrower, and will only need to follow up on the property. A pre-approval can also work in your favour if a seller is looking for a quick sell, or quick settlement. By having a pre-approval you are showing that you are serious about buying, have been conditionally approved for the funds and will be able to aim for a short settlement. This can be very attractive to a seller, and can be the thing that gets you over the line when it comes to a seller accepting your offer.
Another benefit to a pre-approval, is that it allows you to bid in an auction, or potentially negotiate a private sale. With your funds conditionally approved, you have the ability and upper hand to be able to bid confidently and negotiate a price that is in your means.
So, why many people find a pre-approval a waste of time, or unnecessary, the benefits of having one, as well as the time it will save you once your offer has been accepted, it is clear that a pre-approval should be the first step in the process of buying your first (or next) home. And the easiest way to apply for a pre-approval? Call Mortgage Choice Unley on 8273 7970! Will access to over 20 different lenders, we are sure to find the best loan option for you, and better yet, our service is at no cost to you!