You don’t have to wait until you’ve found a home you’d like to buy before you reach out to us. In fact, we’d strongly recommend you contact us first.
Arranging a pre-approval before you start making offers, will ensure you’re well placed above the competition and also ensure you’re not taking any unnecessary risks.
Here are three reasons to arrange a loan pre-approval before you officially start house hunting.
1. A Pre-approval gives you a budget to stick to
When it comes to a major life decision like buying a home, we don’t think it’s the time for guesswork.
With a pre-approved home loan in place, you’ll know the maximum amount you can borrow. A lender will have verified your application and confirmed they agree in principle to lend you funds up to a specific price point.
Knowing your upper price limit provides the perfect foundation for house hunting because it means you can focus on homes within your price range, and then make an offer with confidence.
A pre-approval is especially important if you’re looking at properties that tend to sell via auction, because it draws a very clear line in the sand for your absolute highest bid.
2. You can act fast
There’s still demand for quality properties in quality locations.
Having a pre-approval in place means you can quickly progress to a Formally Approved (or Unconditionally Approved) loan once your offer has been accepted.
In the ACT, once your offer is accepted, it’s generally expected that you will sign the contract (and legally commit to the purchase) within 5-10 business days later.
When you have a pre-approval already in place, the lender has already done most of the work when your pre-approval was issued. Which means that converting your pre-approval to a Formal Approval can be a pretty quick process.
Conversely, if you have an offer accepted without a pre-approval, you’re a little behind from the outset. Instead of converting a pre-approval to a Formally Approved loan, we first need to find a suitable lender, prepare an application for lodgement and then wait for the lender to fully assess your application. This often adds time to the process, and can result in you not being able to Exchange on the contract (i.e. officially lock in the purchase) as quickly as you would like to.
3. Pre-approval can show you’re a serious buyer
Nothing says ‘genuine buyer’ like having a home loan pre-approval in place, so don’t be shy about letting real estate agents know your loan is pre-approved. It can add clout to your negotiations and gives vendors confidence that you have the finance to back up your offer.
Just be sure not to reveal all your cards to the agent – for example, how much you’ve been pre-approved for. The real estate agent is trying to get the best price for the vendor, and if they know you have the capacity to offer something a little higher (based on your pre-approval amount), they may use this information to their advantage!
How reliable is a home loan pre-approval?
Whilst a pre-approval doesn’t provide 100% assurance you’ll be formally approved for a loan, it provides a very good indication you’ll be able to secure the funds you need.
As part of assessing your pre-approval, the lender will review your capacity to service the proposed loan and check to confirm you satisfy their lending policy. If there are any issues (with undisclosed liabilities or blemishes on your credit history for example), these will typically be identified at this preliminary assessment stage – i.e. before you commit to buy something.
You won’t get the full green light until you’ve had an offer accepted and the lender has confirmed the property meets their lending criteria.
At this point in time, the lender will also want to check your personal finances haven’t changed since your loan was pre-approved. Specifically, the lender is likely to confirm you’re still working and you still have your deposit funds ready to go.
Which pre-approval is better?
Home buyers are often surprised to learn that not all pre-approvals are equal. There are two main types of pre-approvals to be aware of – system (or auto-generated) pre-approvals and fully assessed (or manual) pre-approvals. Here you can find more detail about the different types of pre-approvals here.
Keen to get your own pre-approval in place?
If you’re looking to buy a home soon and want to get an edge over the competition, then reach out to us now to get a pre-approval in place.
We’ll help you work out which lender and loan product might be a good fit for your situation, so you’ll be house hunting in no time.
