• The right property could strike at any time, so it pays to have your finances ready.

     


    Despite the recession, with low interest rates, the lust for real estate has not subsided in Australia. In fact, it’s a great time for many to buy.

    For this reason, it pays to be prepared. If your home loan has been pre-approved, you can hit the ground running when the right property arises.

    We spoke to RAMS Wollongong Franchise Principal and Home Loan Specialist Matthew Clark to find out why pre-approval is a good idea.

    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.

    Why-it-pays-to-be-ready-house 
    Have your finances ready to go or risk missing out! Picture: realestate.com.au/buy

    “Pre-approval is made up of three key components,” Clark explains.

    “One is an income assessment to determine how much you can afford to borrow; the second is a credit check to make sure there’s nothing of concern in your credit history; and the third is confirmation of your deposit savings, including whatever you’re going to use to help with that deposit, including equity, a guarantor or a First Home Owner 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 it?

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

    It helps you know what you can borrow

    “How much you can borrow is influenced by so many factors,” says Clark. “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.”


    Why-it-pays-to-be-ready-modern-house 
    Like the look of this modern five-bedder? Can you afford it? Picture: realestate.com.au/buy

    Avoid waiting (and missing out)

    Clark has found that turnaround times for loan applications can vary depending on your lender.

    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.

    “The last thing you want to do is find a house you really love and your bank takes too long to approve your finances,” he states.

    “From a borrower’s perspective, a pre-approval is a lot of the work done already done.”

    Have an edge on your competitors

    Finally, Clark has found that 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.

    Why-it-pays-to-be-ready-house-and-garden 
    Pre-approval gives you an edge on the competition. Picture: realestate.com.au/buy 

    “If there is competition for the property, having pre-approval means you can let the real estate agent know that you are good to go and that your offer is genuine,” he explains. “It gives your offer more weight.”

    Once pre-approved, am I approved forever?

    No. Pre-approval is typically valid for 90 days at a time.

    However, Clark assures that if you need to extend, this is typically fairly easy.

    The main thing to consider is if your finances change.

    “If anything changes – if you’ve lost your job or you’ve taken out a new credit card – it is important to let your lender know as that could affect the pre-approval,” he says.

    “Having said that, depending on the change, making the updates shouldn’t be too onerous. It could be a case of just providing some updated documents.”

    So, with the property market booming right now, never has pre-approval been more important.

    What are you waiting for – happy house hunting!


    This article originally appeared on realestate.com.au as ‘Why it pays to be ready: A guide to pre-approval’ 


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  • Disclaimer:

    While such material is published with permission, RAMS is not responsible for its accuracy or completeness.  This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.