Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.
But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval will help determine if you’re eligible to borrow money from a lender and it will also give you confidence knowing how much you can afford to borrow. You don’t want to find out after you’ve made an offer that your credit history or your deposit isn’t up to scratch.
Obtaining a pre-approval before finding the perfect property will also put you in a good position when it comes time to making an offer. With a pre-approval in place you can present yourself to the seller and estate agent as a prepared applicant who is serious and reliable. Sellers are most interested in completing their sale fuss-free and with steadfast funding, and showing that you are capable of both will help put you at the top of a potentially competitive list of applicants.
If you make an unconditional offer on a property (i.e. not subject to finance) without having your loan pre-approved by a lender, there are a few pitfalls that you risk running into.
Firstly, if you don’t have enough money to pay for your property, you run the risk of forfeiting the initial 10 per cent non-refundable deposit. This may differ depending on what state you live in.
Secondly, saving home loan applications to the last minute also leaves less time to find the most suitable loan and have it approved ahead of settlement. Arranging finance as an afterthought can add immense pressure to the process of shopping around for the right loan and gathering the paperwork to prove you can service the loan. You don’t want to find yourself in a position where you are forced to rush this process.
If you’re in the market for a home or investment property and you’d like to know more about home loan pre-approvals, talk to the mortgage experts at My Property & Finance today!