Anyone trying to purchase a home will tell you: it’s a jungle out there. In the property market, competition is fierce, and it’s important to take advantage of all the tools available to help ensure you’re the winning party come auction day.
What exactly is a Pre-Approval?
A loan pre-approval is indication from a lender of the amount of money they will lend a borrower for the purchase of a property. Think of it as a ‘Loan lay by’ (except it won’t actually cost you anything). If your financial circumstances stay the same (i.e. Income) a pre-approval will typically last 3-6 months and If you don’t find a property within that time, it’s very simple to reapply.
Why should I get one?
You’ll know what you can afford
This is important for a number of reasons. With a pre-approval, you’ll know exactly how much you can borrow, which will give you a realistic budget expectation. This will also help to narrow down your property search, and eradicate any properties that are out of your price range. So, no wasted time spent viewing properties you couldn’t afford anyway.
This is also especially useful if you are using a buyer’s agent, as they will need your budget specifications before commencing a property search for you. Also, if your dream property happens to be selling at auction (as opposed to a private sale) a pre-approval will be essential. With no cooling off period under auction conditions, you can find yourself facing some hefty costs if you can’t secure funding in time.
Knowing your pre-approved loan amount will also help you to forecast what the cost of your new property purchase will look like ongoing, and will allow you to predict things like stamp duty costs, estimated repayments etc. This is a big one for us, because life does go on after you buy a home, and we at Pure Finance believe your loan should fit in with your lifestyle, and not the other way around.
It shows you’re serious
In such a tight buyer market, it’s important to give yourself an edge wherever possible, and in terms of real estate agents and vendors, a loan pre-approval is a big indicator that you mean business. It will help you to negotiate with confidence, and can greatly improve your chances at being successful at winning a property, particularly against someone who isn’t pre-approved.
It’s a time saver
Perhaps the biggest benefit to a pre-approval is that a lot of the stressful, time consuming work is done ahead of time, which means when the pressure is on, you’ve given yourself a massive head start. In finance applications, one of the lengthier tasks is the collection of required documents, which can equal high stress when left to the last minute. With a pre-approval a lot (if not most) of the hard yards in securing finance are done, which will allow you to move fast when you need to and snap up that dream home.
If you’re thinking of beginning your property search, and you’d like to have a chat about getting pre-approved, drop us a line!