Thinking of buying a home? Should you get pre-approval?

If you’re looking to jump onto the property ladder then one of your first considerations should be how much you can afford.

Getting a home loan pre-approval from a bank or lender can be done even before you start looking at properties.

Pre-approval is when a lender provides you with a set loan amount for a property that is subject to certain conditions such as valuation and building/pest inspections.

It can provide buyers with a solid understanding of what they can afford or how much more they might need to save to get into the home their dreams.

A few advantages of having pre-approval in place before house hunting include:

  • It can take the stress out of property negotiations by providing buyers with a solid price range to work within.
  • It can bring up any red flags against your name (such as old debts) that you might not have been aware of and need to deal with before you can borrow.
  • It gives buyers the confidence to move on a property quickly.
  • It shows to sellers that you are serious about making a purchase.

There are a few things to be aware of when applying for pre-approval however. They include:

  • Pre-approvals typically only apply for 90s days so it may not be worth arranging if you’re a long way off purchasing.
  • A pre-approval is not a guarantee. A number of factors can lead to formal approval being denied such as a change in bank policies or interest rates, or a low property valuation.
  • Applying for a number of pre-approvals with different institutions can potentially look bad on your credit history.

If you don’t think you’re quite ready to get pre-approval yet then you can use online tools and calculators to work out your borrowing capacity and start you on your home buying journey.

Overall, home loan pre-approval can help you move quickly if you come across a property you fall in love with, and it will increase your chances of securing it – so it’s well worth having if you’re in the market to buy!

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