One of the first and best things you can do when you are looking to buy a house is to approach a lender to get pre-approval for a loan.
When you get pre-approval you are getting a financial institution to agree in principle to lend you an amount of money to buy a property without actually getting the final approval.
While pre-approval is not a pre-requisite for buying property, it allows prospective buyers to know the maximum possible amount they can borrow given their current financial circumstances, and the amount they’ll need for a deposit.
While pre-approval for buying property is not a pre-requisite, it arms buyers with the ability to target property searches to those they can actually afford, more confidence when negotiating and more confidence when bidding at auction.
On top of this, it also shortens the closing period of the loan because there’s no need to wait for the bank to go through the whole loan application process again.
Sellers also love being approached by buyers that have pre-approval, as it shows them they are committed to making a purchase and are unlikely to withdraw an offer due to finance being rejected.
While being rejected for final approval is unlikely after getting pre-approval, it can happen if personal circumstances change, government regulations change, there’s a negative valuation of the property or if there’s a change to the property itself.
Pre-approvals are generally valid for three months but can be extended by up to six months.
To go through the process of securing pre-approval, borrowers need to fill out application forms from their lender and provide evidence of income, savings, debts and other loans. The lender will then assess the situation and provide pre-approval.
A pre-approval should be formal, written and signed by the lender, rather than non-formal applications such as quick and fast online or over-the-phone affairs.
The best time to get pre-approval is before you start shopping around for a house so speak to Perry Finance today if you are about to look at purchasing a property, and get the confidence of conditional finance approval behind you when you attack the market.
