Whilst it is not a mandatory requirement for home buyers to seek a pre approval, doing so can make things considerably easier.
So why might that be?
1) You get a clear and accurate price range
Whilst you can use a borrowing calculator to work out your approximate buying power, different lenders have different requirements and getting pre approval gives you a far more accurate price range.
2) It reduces the financial risks associated with finance ‘falling through’
Home buyers who aren’t able to secure finance by the date of settlement are at risk losing their deposit. Not only is it devastating to not only be going ahead with the purchase, but vendors are within their rights to keep the deposit paid as there is a breach of contract.
3) Greater leverage in negotiations
You can also use your pre approval as extra leverage when negotiating with vendors as you are less likely to have to pull out of the contract last minute because you can’t get finance. You will also have a clear ceiling price to work with in negotiations and are less likely to be pushed into paying over your budget.
4) It gives you time to look around
Most pre approvals last between three to six months, so you have plenty of time after you’ve received the pre approval to look around for your new home.
5) A faster final approval process
Getting pre-approved means you’re likely to have a faster final approval process too, so you won’t be waiting around to hear from the bank before you can settle your contract and move into your new home.
So whilst it isn’t mandatory, we would recommend getting pre approval in writing before beginning the search for your next house as an absolute must. And definitely before any negotiation that might involve signing a contract or paying a deposit.
If you need any more information on pre-approval, feel free to get in touch.
Douglas Piening is a Mortgage and Finance Broker with Piening Financial Solutions and is passionate about providing advice you can trust. Whether it’s buying a home, refinancing a loan, investing, building or renovating, Doug brings a wealth of knowledge and expertise to assist with your lending needs.
You can contact Doug at firstname.lastname@example.org or (m) 0408 671 524.
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This information is of a general nature only and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.