Buying a first home isn’t always easy, and first-timers sometimes miss out on a place they’ve set their heart on. But more than one-in-ten first-time buyers have missed out simply because they didn’t have home loan pre-approval.
Buying a first home can be an emotional roller coaster. It’s not unusual to find a property you love, only to lose out.
A Finder survey shows three-in-five first home buyers have been beaten to homes – usually because they’ve been outbid by a competing buyer.
There’s not a lot you can do about another buyer having deeper pockets.
But there are steps you can take to potentially give yourself a strategic advantage.
One of them is having home loan pre-approval.
Yet Finder reports more than one-in-ten (11%) first home buyers lost out on a home because they didn’t have pre-approval in place.
Here’s why pre-approval can give you a competitive edge.
What is home loan pre-approval?
Home loan pre-approval involves applying for a home loan before you begin house-hunting.
It’s a chance for a lender to check out your details (such as your income, deposit and savings record), and give you the thumbs-up for a loan to a certain price limit.
Think of it as you and your lender both swiping right on each other.
Pre-approval shouldn’t cost you anything. And you’re not committed to take out the loan.
But it can be very reassuring to know you’re good for finance when the right property comes along.
As the lender specifies how much you can borrow, pre-approval also helps set a buying budget, and lets you confidently negotiate on price or bid at auction.
The risks of skipping loan pre-approval
Of course, you can choose to apply for a loan after you’ve found a home to buy.
It can be a more high-stakes approach, and leaving things this late can put you at a disadvantage.
Lenders usually need time to review your application and decide if you qualify for a loan – and how much you can borrow.
That time gap could see a more organised buyer jump in and beat you to the finish line if time is a factor for the vendor.
There’s also the risk of overestimating your borrowing power (that said, we can help you work that out without going through formal home loan pre-approval).
Long story short, while loan pre-approval is not compulsory, it can be a smart step that lets you act fast – and with confidence – and it tells sellers you’re a serious contender for the property.
The fine print on home loan pre-approval
A few finer points of home loan pre-approval are worth knowing:
1. Pre-approval comes with a time limit: loan pre-approval doesn’t last indefinitely. In most cases, pre-approval extends for three to six months depending on the lender. Don’t let this rush you. We can help you reapply for pre-approval if that time lapses.
2. Pre-approval is based on your circumstances when you apply: life doesn’t stand still for long. If your circumstances change after receiving home loan pre-approval, let us know and we can talk to your lender to update your pre-approval.
3. Not all lenders offer home loan pre-approval: every lender is different. And some choose not to offer loan pre-approval. We can save you time by explaining the lenders that offer pre-approved home loans.
Get in touch for more information
If you’re not sure where to begin with home loan pre-approval, contact us today.
We can guide you through the steps involved, and explain how home loan pre-approval could help you beat other buyers to the punch.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
