Buying a property often takes a lot of forethought and planning and for many the first step will be figuring out how much they can borrow from the bank.
Luckily, there are plenty of online mortgage calculators that can help you get a rough idea of what you can spend and the lender you want to use.
Once you’ve figured out your preferred lender it’s well worth heading to them for a chat and arranging for pre-approval to set you off on your home buying journey.
What is pre-approval?
Getting pre-approval for a home loan is when a lender agrees, in principle, to lend you a certain amount of money based on the information that you provide.
It’s important to keep in mind that pre-approval isn’t final approval, as this can’t be given until your lender has all of the details at hand. In particular, the lender will want to assess and value the property you eventually purchase to see whether the price you offered is a fair price for it and you haven’t overpaid.
But in most cases the pre-approval amount you are offered is generally what the bank will be comfortable lending to you, giving you a fair degree of confidence when you go to start making offers on properties.
Reasons to get pre-approval
Lets you know how much you can afford – You can start your property hunt without having pre-approval in place, however knowing what you can afford can help you narrow down your property search quicker. This will help you save time as you will be less likely to look at properties that are out of your price range.
May add strength to an offer – If a seller has multiple offers to consider they may look more favourably on one that has pre-approval in place as it may give them more confidence that the buyer is financially capable of paying for the home.
Almost essential for auctions – There’s no cooling off period if you purchase a property at auction so you’re going to want to make sure you’re prepared. Having pre-approval can give you more confidence when bidding under the hammer.
Can help you act quicker – Obtaining a home loan can be a lengthy process due to a lot of the identity and financial checks that need to take place. Having pre-approval can help speed up the final application process, meaning you won’t be left sweating when you do make an offer and are hoping your approval gets through on time.
Overall, organising pre-approval can be beneficial and arm you with confidence when you’re looking to buy a home. It’s always a good idea to do your own research however and to speak to a financial professional to get the best advice for your particular situation.