Buying a house to live in or for investment is exciting but can also involve a certain amount of stress. You can fall in love with a property, set your heart on it and then have the rug pulled from under you because you can’t get the home loan you need. That’s not exciting, it’s disappointing! Especially if it keeps happening.
That’s why it’s a good idea to get your home loan pre-approval before you go house hunting. Pre-approvals significantly reduce the amount of stress and should be part of your property buying process. Why spend your weekends working out open home schedules, packing the kids in the car and walking around properties when you don’t know how much you can borrow and if your bank will approve a home loan? Don’t waste your time looking at properties you can’t afford.
Why you need a home loan pre-approval
Pre-approved home loans are the way to go, especially with auctions becoming more popular. You can bid with confidence knowing you have the bank’s endorsement. It also takes the stress out of the process, so you don’t have to worry if a bank will back you.
In the event that you’re buying a home privately through an agent, rather than auction, pre-approvals are still advisable. Not surprisingly, you will be more attractive to a seller if they know you can move forward with the purchase. A buyer with a pre-approved home loan can also shortcut the lending process by three weeks, which can also make for a faster settlement.
For first time home buyers, approaching a bank beforehand helps you to understand all related costs and establish a clear total property purchase budget. With a pre-approval you can grasp exactly how much you’ll pay for settlement, stamp duty, government charges, inspection costs, and other costs. This makes purchasing your first home less stressful.
Getting A Home LOan pre-approval
When applying for a loan pre-approval it’s a good idea to shop around and explore your options. If you go to a bank, you’ll just get one product offered but enlisting the help of a finance broker makes it easier to explore your options as they can tell you about all the products available and help you select the most suitable one.
To show you can meet the loan requirements you will need to provide necessary documentation of your personal finance, such as proof of deposit, details of existing assets, income and expenses.
Once you’ve got a pre-approval for a loan it will last for 3 months. But don’t get a pre-approval knowing you’re about to change your job or incur big expenses, as these will be noted by the bank when the formal application is processed and will affect the amount you can borrow.
Final Thoughts
Having a clear guide on how much money you can spend is a big help when you’re house hunting as it narrows down the field. Home loan pre-approvals provide you with a ceiling limit so you can be realistic about what home you can afford and what your mortgage repayments will be so you can ‘buy’ with confidence.