Knowing your purchasing power is essential before diving into the property market. Not only will this help refine your property search, it also ensures you can move quickly when you find your ideal property.
The most effective way to confirm your borrowing capacity is to secure a pre-approved loan from your lender, and the good news is that it’s pretty straightforward to organise.
Pre-approved finance is essentially a written guarantee from your lender that they will lend an agreed amount within a set timeframe, subject to the valuation of a property.
While a pre-approval does have some conditions attached, such as a satisfactory valuation of the property, it essentially confirms what you can borrow before you begin your property search.
There is considerable merit in knowing your budget before you go out to buy. This will help you refine your property search, ensuring you don’t waste valuable time looking at properties that are out of your budget. But not only does this give you a firm guideline as to what you can afford, it is a strong endorsement to real estate agents and to the seller that you’re a serious buyer.
One of the key roles for the estate agent is to separate the serious buyer from the tyre kickers and a pre-approval is a sure-fire indication that you’re there to do business. This may mean that you’re in a stronger position to negotiate on price but the real benefit is if there are two offers on the table – one pre-approved and one not; you can guess which buyer will get the thumbs up.
No agent wants to see a property sale fall down because finance has fallen through and so if there’s money on the table it is likely to win the property.
Securing a pre-approved loan is surprisingly easy to organise and your broker should be able to get things underway quickly. Most lenders offer pre-approvals these days and they usually take no more than two to three days to arrange.
The application for a pre-approval is much the same as applying for a mortgage. You’ll need to provide proof of income, savings etc to your lender to give you the green light. The good news is that there is absolutely no obligation with a pre-approved loan, so if you don’t decide to buy, the pre-approval simply expires after the agreed timeframe.