The Australian property market has certainly been ‘hot’ with properties being snapped up within hours and days on the market, and many people paying well over reserve prices at auctions. How can you put yourself in the best possible position as a potential buyer to secure your next home or investment property. One answer to this question is to secure yourself a pre-approval.
This week we’re exploring 6 key reasons that you should secure your pre-approval.
- Be crystal clear on your budget
A pre-approval with most lenders will require a full assessment of your current financials, excluding the valuation and assessment of the property your purchasing to determine if the lender will provide you with the loan amount your requesting. This allows you to be crystal clear on exactly how much you can afford to borrow, and what your overall budget looks like for your home or investment property.
This should also assist in removing some of the emotional factor in your purchasing decision, which can be an issue particularly if you’re looking to buy your own home. With a pre-approval in place, you can clearly set your purchase parameters and ensure that you remain within them.
- Keep a cool head at auction
If you’re planning to purchase a property at auction, which is particularly common practice in both Sydney and Melbourne, this can lead to people often exceeding their budget by getting carried away with the buzz and activity on the day. With a pre-approval in place, you should have a clear indication of your upper limit when bidding, and you can ensure that you don’t exceed it with the knowledge that you wouldn’t be able to obtain enough of a loan.
- More likely to have your offer accepted
In a ‘hot’ property market like we’re currently experiencing across most Australian capital cities, an offer from a potential buyer that already has a pre-approval in place, is far more attractive to both the selling agent and vendor, than a buyer who still needs to apply for finance. This lets the vendor know that you’re already done your homework, will not be faced with lengthy delays in starting your home loan application from scratch, and that you’re in a position to be able to settle.
- Reduce the stress once your offer is accepted
Buying your own home or investment property can be a stressful and anxiety-producing time, particularly with all of the paperwork and administration that’s required. From setting up building and pest inspections, to getting depreciation reports and identifying conveyancers and managing agents, there can be a great deal of work to be done. With a pre-approval in place, you can at least have the peace of mind that there is little else to arrange for the financing as the hard work has already taken place.
- Identify any required changes to your finances
Going through the pre-approval process with a savvy mortgage broker will also enable you to identify any areas of your personal finances that may require improvement or cleaning up to enable you to borrow the amount that you’re after. This may mean closing down credit cards or reducing limits, paying down personal loans, or even moving into a cheaper property with a lower monthly rental expense. This assessment will give you plenty of time to make the required changes to get you ready for your property purchase.
- It gives you more room to negotiate
As we mentioned in point 3, having a pre-approval in place makes you a more attractive potential buyer to both the vendor and the selling agent. This means that you may very well have more room to negotiate and may find that you can lock in a better deal than if you didn’t have your financing approved. A vendor may be willing to reduce the selling price by $20,000 – $30,000 for a buyer that already has a pre-approval, rather than roll the dice with a buyer offering more with the added risk of their financing application falling over.
If you’d like to explore your lending options, and look at securing a pre-approval, reach out to our team today and book in a complimentary discussion. We’ll work with you to determine your maximum borrowing capacity, identify any areas for improvement in your personal finances for your loan application, and identify the suitable lenders for you.
LoanSuite Pty Ltd is your lending partner for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.
Book an obligation-free, complimentary consultation here today.
LoanSuite Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.