Spring can be an exciting time to start searching for your first home or next investment property. But before you start inspecting properties and making offers, it’s important to understand where you stand financially.
One term you’re likely to come across is conditional pre-approval. While it can give you a clearer idea of your borrowing position, it’s important to understand that pre-approval isn’t the same as final loan approval.
Here’s what you need to know before you start house hunting this spring.
Conditional pre-approval is when a lender agrees, in principle, to lend you up to a certain amount based on the information you’ve provided. It’s also commonly referred to as pre-approval or approval in principle.
However, pre-approval doesn’t guarantee that your home loan will be approved.
Once you find a property, the lender will still need to assess the property and complete the formal loan application process. They may also review your financial circumstances to make sure nothing has changed since your pre-approval was issued.
Formal, or unconditional approval, is generally provided once the lender has completed these assessments and is satisfied that all lending requirements have been met.
While pre-approval isn’t always required before you purchase a property, it can be a valuable step in your home-buying journey.
Pre-approval can give you a clearer indication of how much you may be able to borrow and help you establish a realistic property budget.
Knowing your borrowing position before you start looking can help you focus on properties within your price range and feel more confident when making an offer or bidding at auction.
Having pre-approval can demonstrate to sellers that you’ve already taken steps to organise your finance.
While it doesn’t guarantee your loan will be approved, it can give sellers greater confidence that you’re a serious buyer and that your offer has financial backing.
The property market can move quickly and having your finance pre-approved means you’ve already taken an important step before you find a property you love.
With much of the initial financial assessment completed, you may be in a better position to move forward when the right opportunity comes along.
Conditional pre-approval doesn’t last indefinitely. The validity period can vary between lenders and depends on your individual circumstances.
If you haven’t found a property before your pre-approval expires, your lender may require updated financial information or another assessment before extending or renewing it.
It’s also important to keep your Mortgage Broker informed if your circumstances change while you’re house hunting. Changes such as a new job, additional debt, changes in income or increased living expenses could affect your borrowing capacity.
Getting your finance organised before you start looking at properties can help you understand your options and approach your property search with greater confidence.
A Mortgage Broker can help you assess your borrowing position, compare suitable loan options and guide you through the pre-approval and application process.
Thinking about buying this spring? Get in touch with our team today to discuss your goals and find out what your next steps could look like.
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