First Home Buyer
Buying Your First Home
Stage 4: Get a Loan Pre-Approval
Before you start looking seriously for a home, get a fully assessed loan pre-approval. This is a statement from your lender saying how much they are prepared to lend you. It is free and valid for 3 months to 6 months, depending on your lender.
It’s a serious process and it has many advantages. In addition, all the work you do towards choosing the lender and filling in paperwork for your loan pre-approval won’t need to be repeated when you apply for your actual loan.
Having a loan pre-approval gives you very clear guidance on how much money you can borrow, so you’ll know how much money you can spend on a house. This will save you time and energy, since you won’t be looking at homes you can’t afford.
Sellers often prefer buyers with a pre-approved loan. If a seller has several offers to buy their house they prefer someone who has a pre-approval since it’s less risky. Sellers may also be more willing to negotiate with someone who they see as a serious buyer. In addition, real estate agents may work harder on your behalf if they consider you to be an actual property buyer.
Having pre-approval can give you confidence when you’re bidding at an auction or negotiating a purchase price. Not only that, it quickens the settlement process as the loan is already part of the way being formally approved.
Please note that online applications and over the phone loan pre-approvals are not formal fully assessed pre-approvals and come with many conditions. This is not something that I would consider suitable for first home buyers.
Even with pre-approval, there is still an element of doubt until you have the final approval from the lender, usually known as “Unconditional” approval. This is the final guarantee that you will receive finance for the purchase.
Here are some factors that can impact pre-approval:
The conditions in your pre-approval will be “subject to a satisfactory valuation of the property”. Depending on your lender, certain types
of property may be unacceptable. For example, they may reject a property in poor condition or certain locations may not be acceptable to
Change in Personal or Financial Circumstances
Changes in your financial circumstances after your pre-approval may impact on your pre-approval as they can affect your ability to repay your loan. So, if you change jobs or change from full time to casual work, or take on a new loan or credit card, the lender may need to reassess your application as these can affect your loan repayment ability.
Your personal circumstances may also change in a way that affects your ability to meet loan repayments. You may have an addition to your
family or you may have had to spend your savings on an emergency expense.
Interest Rate Change
There is always a possibility that interest rates could change between receiving your loan pre-approval and buying your home. If the interest rate increases, the maximum amount that you are able to borrow may decrease. The opposite is also true, so if the interest rate falls, you may be able to borrow more.
We’re here to help you
Dealing with banks can be a stressful experience but rest assured that our mortgage broker based in Glenelg (but our mortgage broker services the entire Adelaide Metropolitan area) can help you make the right decision about your mortgage. We will guide you at every stage of your loan process.
Contact us on 08 8376 0455 or drop into our office at 593 Anzac Highway, Glenelg SA 5045.
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.