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When you’re buying a new home, there are plenty of important things to consider, including whether or not to pursue a home loan pre-approval.
By understanding the pre-approval process and the benefits it can provide, you can make an informed decision that aligns with your property goals and allows you to take control of your finances as you embark on your home ownership journey.
Feeling unsure of what the pre-approval process looks like and whether it’s the right choice for you? Here’s what you need to know.
What is pre-approval?
Home loan pre-approval is what happens when you obtain approval from your lender to provide a specific loan value towards your home purchase before you have submitted an offer on a property.
When you get pre-approved for a home loan, you can submit all necessary paperwork and financial documents ahead of time, allowing your lender to assess your borrowing power and offer a loan package before you need it.
While pre-approval is not essential, it can be helpful in simplifying the home-buying process and taking some of the stress out of obtaining a loan.
The benefits of getting pre-approved
Getting pre-approval for your loan can have many benefits.
Pre-approval provides you with clear insight into your total borrowing power. This can help you set realistic goals, understanding your budget and searching for properties that align with what you can afford.
Loan pre-approval can also give you a competitive advantage in a challenging real estate market.
With pre-approval, you can offer fast on a property that might otherwise be snapped up by another buying as you wait for your loan approval.
Often, pre-approved buyers are more attractive in the eyes of sellers, as pre-approval shows your seriousness and financial capacity, making it less likely that you will withdraw your offer.
How the pre-approval process works
The pre-approval process works similarly to any other loan approval process.
To get started, book an appointment with a skilled and experienced mortgage broker who can guide you through all relevant loan requirements.
Your broker will ask you to provide various documents, including identity documentation and evidence of your income, expenses, savings, and other financial indicators, such as your latest tax return.
Your broker will then help you liaise with a suitable lender to obtain the best-value loan product in support of your property purchase.
Things to keep in mind
When seeking home loan pre-approval, there are a few things you should keep in mind.
Remember that while pre-approval improves the likelihood that your loan will be approved, it isn’t a guarantee. Changes to your circumstances or a negative valuation of your chosen property could affect lending criteria.
Loan pre-approvals may also come with a time limit. Often, pre-approval will expire after three months. If you’re not serious about buying within this time, it may be best to wait so that multiple loan enquiries don’t jeopardise your financial reputation for the future.
If you need help with pre-approval and other property finance requirements, Our Top 10 are here to help. Find the best mortgage broker Sydney has to offer today.
