Your Guide To Pre-Approval

The right property could come up at any time so it pays to have your finances ready so you do not miss out.

Properties on the Gold Coast are still moving quickly so for this reason, it pays to be ready and if your home loan has been pre-approved, you can hit the ground running when the right property arises.

 

What is pre-approval?

Home loan pre-approval is an almost guarantee of how much you can borrow.

It involves completing the home loan application process before you’ve found the property of your dreams.

Pre-approval is made of 3 key components:

1. an income assessment to determine how much you can afford to borrow

2. a credit check to make sure there’s nothing of concern in your credit history

3. confirmation of your deposit savings, including whatever you’re going to use to help with that deposit, including equity, a guarantor or a government grant

The next step after pre-approval is a valuation of the property you intend to buy (once you’ve found it).

 

Why do you need pre-approval?

You don’t “need” pre-approval, but it does give you an edge on several fronts such as:

1. It helps you know what you can borrow

How much you can borrow is influenced by so many factors - It isn’t as simple as ‘I make X-amount per year and can therefore borrow this much’. It can depend on where you live, your expenses, other loans or credit cards, even how old your kids are. There are a lot of things people don’t know can affect their borrowing power.

Without pre-approval, you might not be exactly sure what you can borrow, so you may be looking at homes in a completely wrong price bracket. Pre-approval gives you more security and comfort in what you can actually afford.

 

2. Avoid waiting (and potentially missing out)

The risk in starting your application process after finding your property is that this delay in approval could mean you miss out to other buyers.

 

3. Have an edge on your competitors

Vendors and agents love to know when their potential buyer has pre-approval. It means you can move quickly and that you’re not making empty promises, so to speak.

 

Once pre-approved, am I approved forever?

No, pre-approval is typically valid for 90 days at a time. The main thing to consider is if your finances change.

 

Disclaimer: This blog post is not to be considered legal advice. If you are seeking specific legal advice we suggest that you consult a legal professional before making any significant decisions in this regard.

References: Why it Pays to Be Ready: A Guide to Pre-approval - realestate.com.au