Why it’s worthwhile to get a home loan pre-approval
When you’re preparing to buy a home one major step that you shouldn’t skip is getting a mortgage pre-approval. This optional but important step will streamline your buying journey and offer some powerful benefits.
Understanding Mortgage Pre-Approval
To start, let’s clarify what a mortgage pre-approval is. A pre-approval is when a lender evaluates your financial situation and gives you a conditional commitment for a specific loan amount. This assessment looks at your income, expenses, credit score and debts. It’s more reliable than a pre-qualification, which is just an estimate.
When you receive a pre-approval, it means that the lender has checked your financial details and decided on the amount they would be willing to lend you, should all other conditions be met. Once you have found a property it will still need to meet the banks criteria for title, floorspace and so on, and will also need a valuation.
Benefits of getting a Home Loan Pre-Approved include:
Enhanced budgeting: pre-approval will give you clarity on what you are able to spend and allow you to pursue properties in your price range with confidence
Strengthening your offer: in today’s ultra competitive real estate market, a home loan pre-approval can make your offer more appealing. Sellers will immediately know that you are serious and that you have the financial backing to close the deal.
Speeding up the buying process: timing can be everything when it comes to buying a home. If you’re pre-approved, you will move faster through the process as many of your financial checks will already be done.
Identifying potential issues earlier: One extremely useful aspect of a pre-approval is that it can identify issues that need to be addressed before you start seriously house hunting. For example, there may be an old or incorrectly noted debt on your credit report that we need to tidy up, or perhaps your middle name is spelt differently on different documents (speaking from personal experience on that one!). If you can straighten out these little niggles before you start negotiating you will be in a much better position.
Peace of mind: potentially the most underrated benefit of pre-approval, the peace of mind you will have from knowing where you stand can be a game changer. The home buying process is exciting, but will often also be stressful and overwhelming, with many doubts about finances and choices. Having a pre-approval will help you approach your search with confidence since you have that clarity about your budget and financial capacity.
Pre-approvals will last for three months and can be renewed by providing new pay slips and financials if you haven’t found your property yet.
Final thoughts
As you approach the home buying process please consider the benefits of obtaining a mortgage pre-approval. The time and stress that you save will be well and truly worth it and will allow you to focus on finding the right property.