Is this your year to get into the housing market? Currently prices are trending upwards and experts predict we could be in for another housing boom by 2021. So now could be the perfect time to build or buy a home.
Before you sign on the dotted line, you need to get your finances in order. If you’re a first home buyer or if it’s been a while since you last purchased a property, here’s a helpful rundown of how to get your pre-approved home loan ready.
What Does ‘Pre-Approval’ Mean for Home Loans?
Pre-approval is simply a term used to describe how much money a bank or other lender is willing to give you for the purchase of a home. Also known as ‘conditional approval’, pre-approval should be your first step on the path to home ownership.
You can apply for pre-approved with your chosen bank or credit union or a mortgage broker – who will filter through a range of banks in securing your loan.
It’s important to remember that while pre-approval will provide confidence and streamline the buying process once you’ve found your dream home, a second process of formal approval needs to be completed shortly before property settlement.
You can void your pre-approval – if your financial or personal circumstances decline from the time of obtaining pre-approval to the time of applying for formal approval.
That’s why it’s important to understand the timeline of pre-approval to purchase so you aren’t taken by surprise when it’s time to formalise the crucial paperwork.
How Do You Apply For Pre-Approval?
While applying for pre-approval is quite a straightforward process – here are some points to discuss with your lending consultant:
- Discuss the loan type you want: A home loan isn’t a one-size-fits-all solution. There are a few different options at your disposal, do you want a fixed loan that will lock you into a set interest rate for one or more years? Or would you prefer to enjoy the current low interest rates and choose variable terms? Or Interest only loan during the construction period of your home?
- Ask about offset versus redraw? – or making weekly mortgage payments – and possible benefits in your circumstances.
- Get your information in order: Now it’s time to fill out the pre-approval paperwork for your lender. This will include all the basic verification information (name, age, address), evidence of income (i.e. payslips, benefits) – evidence of outgoings (i.e. HEX fees, rent, car loan) – evidence of savings & expenditure – in form of bank statements.
- The Lender will assess your financial situation and determine the amount mortgage they will lend you in your current circumstances.
How Long Does Pre-Approval Usually Take?
Depending on your chosen lender, pre-approval can take anywhere from several days to only a few hours. – depending on the type of preapproval.
Written pre-approvals from a bank – involve more lengthy pre-approval assessments that involve the lender’s professional credit department (and include obtaining & reviewing your full credit report and reviewing your banking statements) may take several days.
Does Pre-Approval Guarantee You’ll Get The Loan?
Not necessarily. Pre-approval isn’t an iron-clad agreement that you will be accepted for the loan. Be aware that a few different factors can cause hiccups, a pre-approval is issued subject to various conditions – including an expiry date, changes to your personal or financial circumstances; new government lending regulations; property valuation.
3 Top Benefits of Getting a Pre-Approved Home Loan
- You know exactly what price you can afford: With pre-approval you have a set figure that shows how much you can spend on a home. This helps you choose your ideal spending budget in relation to house and land purchase.
- You can make an on-the-spot purchase: Pre-approval allows you confidence to search and secure that perfect lot on the spot. It also shows the vendor that you are serious about buying and simplifies your purchase.
- Less paperwork: Once you are pre-approved, you’ll already have done most of the legwork required to get the purchase over the line. It will also speed up finalising all the loan documents once your offer has been accepte
That means no matter where you’re thinking about buying around Australia – such as in master-planned communities and developments like Savana in Victoria – you will be as financially prepared as possible to secure your dream home.
As a boutique village address that offers an exceptional location and a true sense of neighbourhood spirit, it all comes together at Savana. You can start your new journey by purchasing land at Savana, so enquire today.
Content originated from AVID.