What is pre-loan approval and how can it help me?

shutterstock_297531665Before diving into the property market, whether it’s to buy your first home or an investment property, it is a great idea to first obtain a pre-approval for your loan from your lender. Pre-approval gives you an edge when looking for the right property as it lets you do a lot more things when shopping for a property, such as:

1. Know how much you can afford.

With a pre-approved loan, you’ll know exactly how much you are able to borrow from the lender. This then gives you a concrete idea on the price range that you can afford. Keep in mind that when figuring out your ideal price range, also factor in the other expenses aside from the loan amount, such as the application fees, professional fees, and stamp duty. All of these are important considerations because they could cost several hundreds to several thousands of dollars. Your mortgage broker will assist in explaining these costs.

2. Make offers on properties faster.

Once you know how much your budget is, it also allows you to make offers on properties sooner. Nothing is more disappointing than having your eyes on your dream property that’s within your budget only to have someone else beat you to it. Having the ability to make quicker offers also means that you will be able to move into the property or put it out for rent at a much shorter time.

This may also apply if you’re planning on buying a property at an auction. A pre-approved loan lets you bid with confidence and lets you know up to which amount you’re able to make a bid.

3. Position yourself as a serious buyer.

Money talks when you’re buying a property. Agents will gauge how serious you are about acquiring what they’re selling and if you already have pre-approval, this shows the agent that you’re serious and can afford what they’re selling giving you an edge over your competitors.

In general, pre-approved loans are valid for up to 3 months. This should give you enough time to scout for properties and make offers.

Lenders also usually have a number of requirements when deciding whether or not to pre-approve your loan. These may include your financial documents, the estimated price of the property you’re planning on buying, and the loan amount. Overall, if you have a positive credit history and you’ve shown enough proof that you can service the loan, then it’s highly likely that your lender will approve your application.

Keep in mind that applying for too many loans can have a negative impact on your credit history as lenders may see those as potential debts. Because of that, apply for loans the smart way by limiting your options first instead of applying for all loans that come your way. Your mortgage broker will advise which loans are most suitable to ensure you are not rejected once submitting your application, making the process smoother and stress free.

Your mortgage broker will factor in your requirements and personal circumstances and then recommend loans that match your needs. They can even process and follow up your application on your behalf for an added level of convenience. So, if you’re planning on taking out a loan, call (08) 9367 4222 to get in touch with me today to arrange an appointment.

Written by Cale Walsh.