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Before you start looking for a home, it is always advisable to obtain a home loan Pre-Approval.
Home loan pre-approval benefits
Understanding Pre-Approval
A Pre-Approval is a conditional approval. (Also known as AIP - Approved in Principle). A fully assessed pre-approval application should be subject to finding a suitable property and a property valuation.
Pre-Approval vs. Formal Approval
While a Pre-Approval is not a guarantee of Formal Approval, it’s an indication from the lender that you can borrow the required amount for your desired purchase price.
The Advantage of Pre-Approval
With a Pre-Approved home loan, you can shop around for your new home and make offers with the confidence that you are within your approved budget.
90-Day Validity of Pre-Approval
Generally, a Pre-Approval is valid for 90 days. If you haven’t found a suitable property and your Pre-Approval expires, you may need to resubmit a new home loan application with updated documents.
Before choosing a home you should have a home loan Pre-Approval
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Home loan pre-approval benefits
Before you start looking for a home or investment property, it is always advisable to obtain a home loan Pre-Approval.
There’s nothing quite like shopping for your new home.
A home loan pre-approval gives you peace of mind that you are considering properties within your budget.
This doesn’t just save time, it’s also an important financial safeguard.
With a home loan pre-approval in place, you can try to avoid the potentially disastrous situation of making an offer – or worse, paying a deposit on a property, only to discover you cannot secure funding to complete the purchase.
Home loan pre-approval is also a handy tool when it comes to price negotiations.
Having a home loan pre-approval under your belt is more likely to indicate to selling agents you are a serious contender, and this can add weight to any offers you make.
Reasons to choose a broker to assist with your Pre-Approval
While most people may see most home loans as being similar, there is a large variance in lenders policy requirements.
For example, different ways lenders assess income, overtime, contract payments, rental income, depreciation etc. This can all give a different result to your home loan application.
Even with deposits, some lenders require genuine savings. What is genuine savings?
Genuine savings would be viewed as 5% on the purchase price in a savings account for 3 months.
Others lenders may accept good rental history as genuine savings.
Other forms of acceptable savings history may be repayments of personal loans, assets in other investments, family loans etc as proof of savings.
Knowing your exact position on these factors enables Your Home Loan Consultant the ability to help you choose the most suitable lender for your individual needs.
Property Buying Journey
Going through the buying journey with a mortgage broker is a great decision if you’re new to the process or when purchasing your next property. A mortgage broker will be able to assist you, review your circumstances and look at a few different options or scenarios for you.
Your mortgage broker will help you through the entire process from your initial assessment to pre-approval, purchasing a property and through to settlement.
Mortgage brokers are the go between the lenders and yourself and are there to find you the right loan and lender.
Real Estate Agent:
The Real estate agent will support your purchase process when you have found your dream home or investment property. It’s important to do your research and only work with a real estate agent you trust so you can ensure you’re getting the best deal possible.
Conveyancer:
A conveyancer plays a necessary role in the process as they will assist you in the settlement and the title transfer process. They will ensure legal obligations are being met and their client’s rights are being protected.
You will incur conveyancing fees so it’s important to account for these fees to ensure there are no surprises.
Pre-purchase decisions:
Exactly what you’re doing now – looking at your options, your financial circumstances, looking at the options available to you and if you haven’t done so already, looking at a savings plan and a goal to get you into your dream home.
You will be sitting down now with your mortgage broker or financial professional and collating all the information you need to apply to a lender best suited to you. You will have established a deposit or a guarantor and have a clear idea of how much you’d like to borrow. Your mortgage broker will at this point be preparing your application to submit to the lender.
Purchase:
By this stage you have found the home you want to purchase or the land and house package you wish to begin construction on.
Before you sign on the dotted line, make sure you’ve completed a bit of a checklist which should include a building inspection where you check everything. Some common regrets of first home buyers is that they overlooked things which became costly down the line.
The building inspection will also help you with the offer you’d like to make and any negotiations with the real estate agent.
Building and Pest Inspection:
Once you’ve found a property you’re interested in, you want to ensure there are no little surprises that are going to show up after settlement.
Make sure your sale contract is subject to whatever inspections you think are necessary.A building inspection and a pest inspection are a must.
If the inspections uncover any problems, you then have the option of backing out of the purchase or negotiating with the vendor to either fix the problem or reduce the contract price.
Valuation:
Lenders will arrange for their own valuation or appraisal so they can establish an estimated value of the home or land you are about to purchase. The valuer is independent of the lender and is important in ensuring the purchase price is fair.
Unconditional approval or formal approval:
On your purchase contract you will have a finance date. Achieving Home loan formal approval is what is required to meet this clause. This is the stage when the lender is equipped with everything they need, the valuation has been completed and now the lender is ready to provide formal approval of your loan. At this point you can probably start relaxing those shoulders and putting the champagne on ice!
Insurances:
This is often a part of the process which can be forgotten about, however it’s an important one. There are always risks when entering a large debt. So, it can be a good idea to look at any existing cover or insurances and to take note of any inadequacies or vulnerable areas.
Ask yourself, how would you manage the mortgage repayments if something unexpected were to occur like redundancy, a serious illness, or even if you were to pass away?
Can you rely on your savings to see you through financially hard times? Your mortgage broker will introduce you to loan and mortgage protection – which is a way you can mitigate the risks of entering a large debt.
Property settlement is when ownership passes from the seller to you and the balance of the property is paid. The seller will set a settlement date in the contract of sale which can generally be around 30 to 90 days. Your conveyancer or legal representative will liaise with the lender and book settlement. At this point there is nothing for you to do. When settlement has been completed you will be notified by your conveyancer and your home loan consultant.
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