Why Should I Get Home Loan Pre-Approval?
Are you house hunting and wondering if you should be getting home loan pre approval? How do you even get pre approval for mortgage? A mortgage pre approval, put simply, is a loan pre approval that confirms how much your lender will provide you with for your mortgage. Knowing your borrowing power will put you in the best position to make real estate offers that will keep you on budget. Read on to understand more about how to get pre-approved for a home loan.
What is a pre approval?
A pre approval home loan gives you an indication of what a lender will allow you to borrow based on your financial situation including your income and your expenses. Pre approval is not a definite guarantee, but typically is a good indication of your borrowing power if your personal circumstances stay the same between submitting your application and settling your purchase.
Benefits of a pre-approved home loan
It is not necessary to have pre-approval before you formally apply for a home loan, however, it has a lot of benefits that come with it.
- Know what you can afford. A pre-approved home loan lets you understand your maximum borrowing power and gives you a limit on what you can afford. This means you can set a realistic budget when deciding which properties and locations to consider.
- It shows sellers you are serious. Having home loan pre approval shows sellers and real estate agents that you are a serious buyer ready to act. Having your finances in order can make the whole settlement process smoother and instills confidence you are ready to settle.
- It might give you better negotiating power. If you have mortgage pre-approval, you may have a better chance at getting a lower offer accepted by a seller wanting a quick sale. If your finance is ready to go with pre-approval then it can shorten the time to finalise the settlement – that’s attractive to a seller wanting to move quickly on the sale process.
- It gets you “auction-ready”. Auctions have rules which include the highest bidder being legally bound to buy the property. Having your finances in order with a home loan pre-approval means you can make your best bid knowing you can afford the purchase price. Save yourself the headache and get mortgage pre approval ahead of bidding on your dream house!
How long does pre-approval take?
You may be wondering how long the preapproval process takes. Once you have submitted your application through your mortgage broker, you can expect to receive an answer pretty quickly. Lenders do vary from anywhere from a few hours to two weeks, so it is smart to get the process underway as soon as possible. Having pre-approval can be beneficial to getting a quicker formal approval once your offer is accepted, provided your circumstances have not changed since you submitted the pre approval application.
What is the pre-approval process?
With the help of an experienced broker, your pre-approval will be a hassle-free process! Your mortgage broker will ensure the application is correctly filled out and all supporting documents are available for the lender to review.
You can expect to need to provide the following supporting documents:
- Identification proof
- Payslips/income proof and other financial information
- Savings and/or deposit evidence – bank statements are usually accepted for this
- Evidence of your current debts and expenses
Once submitted, your application will be assessed by the lender. Once you gain home loan pre-approval, it is typically valid for 90 days. It is usually possible to extend the pre-approval period if you need it – you will just need to provide updated payslips and other documents.
A pre-approved mortgage gives you peace of mind when house-hunting. Don’t risk heartache by over-extending your finance and property offers, contact us today and get your pre approval home loan sorted.