Is it a bird? Is it a plane? No, it's a pre-approval!
Your x-ray vision has showed you some properties you’d like to buy. And you’re ready to move faster than the speed of light. But, even your sharp senses aren’t telling you just how much you can borrow… And, uncertainty and lack of confidence are a buyer’s kryptonite! Enter your super power in the world of house buying — the pre-approval. They’re popular —so much so, that the number of Loan Market customers seeking one has doubled in the past two years.
Loan pre-approval means your lender has said that, in principle, they’ll lend you money to buy property. The approval isn’t final or set in concrete, hence ‘pre-approval’. But it’s still good news because you now know the maximum amount you can borrow. You can confine your search to your price range, bid confidently at the right auctions and negotiate post auction with ease. You’ll know whether to look for a tiny house shaped like a star craft, or a galaxy sized mansion. Imagine you really like two properties: one is asking roughly $650,000, the other $750,000. If you're only pre-approved for $550,000, you’ll know neither can happen right now, in this universe... But, if the planets align and you do find yourself active at an auction, your maximum bid will be firmly in mind.
Another plus is that pre-approval makes you more attractive to a seller. It says you're serious about purchasing their property and that they shouldn’t worry too much your offer will be withdrawn. Pre-approval is not a prerequisite to buying a home, but it sure makes life here on earth a heap easier.
Here’s our top five tips for anyone seeking pre-approval of a home purchase:
- Be upfront about any previous, noteworthy, credit ‘blemishes’
- Be wary of a pre-approval that doesn’t include an in-depth review of your past and current financial situation
- Avoid automated online answering systems that don't request or undertake a detailed assessment of your situation —the lack of detail required often means your pre-approval is not worth the paper (or pixels) it’s typed on
- Bear in mind pre-approvals usually only last 3-6 months
- Avoid getting multiple pre-approvals from different lenders in quick succession—every time you apply, it goes on your credit record as a loan enquiry and could make you look financially unstable. Wait until you're seriously ‘in the market’ for a property, rather than flying in too early in the process
If you’d prefer to house-hunt confident about what you can afford, and certain the money will flow, please get in touch today. I organise pre-approvals all the time and will help detail every bit of financial information you need. Together, we’ll get you closer to your dream home. Up, up and away!