Do you want the confidence of walking into your dream home and making an offer knowing you are backed by pre-approved finance?
Looking for a new home can be both daunting and exhilarating. Whether it be purchasing your first home, moving houses, or building an investment portfolio, pre-approved loans allow you to shop with confidence.
What is a pre-approval?
A pre-approval is a conditional approval granted by a lender that allows you to apply for a home loan up to a certain limit. It allows you to focus on your property search with a clear idea of affordability in mind. The document requirements are similar to full formal approvals as the lender must consider your income, current commitments such as other loans or credit cards, living expenses, deposit, and funds to complete the purchase.
You don’t need to find the perfect property before you apply for a home loan.
Even though you may not have started your property search yet, a pre-approval can provide you an indication of what you can afford to buy, and help you start looking. Pre-approvals usually last around 90 days. However, they can be rolled over during the 90-day period if you do not find the perfect property, and your financial circumstances remain the same.
Why is it important to obtain a pre-approval?
- One of the advantages of pre-approvals is demonstrating to the seller you are serious. A pre-approved loan stores confidence in both the vendor and you, the purchaser.
- Provides an idea of how much you can afford. Holding a pre-approval can be perfect for anyone in the early stages of their property search or buying journey.
- There are far fewer chances for hiccups throughout the purchase process. If you decide to make an offer, you can be in position to move quickly and bid with certainty.
- You are under no obligation to take the loan. The approval usually lasts for 90 days, and can be rolled over.
What conditions are pre-approvals subject to?
Each lender will assess your borrowing capacity, income and serviceability slightly differently depending on their specific policy. However, most pre-approved loans are subject to similar criteria or conditions, such as:
- Validation that all information supplied is true and correct and your financial circumstances have not changed
- The lender has received all documentation necessary to validate your deposit, security, assets, liabilities and income
- Satisfactory valuation of any property offered as security for the loan(s)
- Satisfactory credit history
- Whether Lender’s Mortgage Insurance is required. If it is required (generally when the loan amount is for more than 80% of the value of the security property) the loan(s) will be provided only if the insurer agrees to provide the insurance. You will also need to pay the Lenders Mortgage Insurance premium.
What happens next?
Once you have found your dream home and are ready to make an offer, your pre-approval can be converted to formal approval. Your financial position will be verified by the lender to ensure your financial situation has not changed. You can then make an offer knowing exactly how much you have to work with.
How can TMFG help?
Speaking to an expert can help you understand the wide variety of loan features and help you make a more informed decision. A mortgage broker is able to recommend loans that will best suit your personal and financial circumstances, and walk you through the process from start to end. TMFG are by your side every step of the way, making the process clear and simple. Whether you have a property in mind, or just beginning your search, talk to us about a pre-approval today!