What is a Pre-Approval and how can I make it work for me?
You’re looking to purchase your first home or maybe it’s your next one.. Either way, you’ve been planning this for a while, you’re excited and.. you’re ready!
By now, you have probably even looked at how much you can borrow and you think you know what to expect.
However, what you may not realise is that the best way forward is to get a loan pre-approved.
Read on to understand what you need to know when it comes to getting a home loan pre-approved and how it can work for you.
What is a Pre-Approved Loan?
To put it simply, a pre-approved loan is a conditional lending agreement between you and the lending institution that tells you exactly how much they will lend to you for a home.
Once this agreement is made, you can be confident that you know how much you can borrow and focus on finding your new home. At this stage, there is no doubt about whether you can afford home A or home B because you know what you can borrow and what your MAXIMUM monthly repayments will be. It’s all laid out in the conditions of the Pre-Approval!
Doesn’t that sound like a weight that is lifted off your shoulders?
Well, now that we have looked at what a pre-approved loan is, let’s take a look at a few more things you need to know before you can attain your pre-approval.
Starting the ball rolling:
By having a pre-approved home loan in place, it means that if you find a house that meets your borrowing capacity, which is the loan amount noted in the pre-approval conditions, the final part of the application will move a lot smoother and quicker.
It’s important to recognise that your pre-approval is conditional on finding the right property and that there is a time limit on how long this pre-approval is valid for. With most lenders, a pre-approval is valid for 90 days. This means that you should be fairly confident that you’ll find a property that meets your needs within this time frame.
Seal the deal quicker:
If you’ve got pre-approval, it can make the experience of looking for your new home a lot easier. You’ll find that you can move to an unconditional status much quicker before your settlement date, which means less stress and a quicker take over date.
Keep it real:
By having a pre-approval in place prior to looking for your new home, you know exactly what you can afford to buy and what you can’t.
It allows you to understand your budget constraints and be realistic with what you can and can’t afford, removing the possibility of over-committing out of the equation.
Pre-approval is perfect for first home buyers, because it removes all of the uncertainty. You know exactly how much you can borrow and what you’re likely monthly repayments would be based on this amount.
Attaining a pre-approval as a first home buyer, or at any time, just makes sense. Why would you venture out into the home buying market without first knowing what you can borrow and what your monthly repayments will be?
Just remember, every time you submit a pre-approval application, it does get recorded against your credit history. This is why you should always work with a mortgage broker, as they’ll identify the best lender for you without affecting your credit history.
Are you ready to purchase your new home?
Contact Carl today to get your pre-approval application underway.