Are you getting ready to buy a home?
Then it’s time to get your financial ducks in a row. Most homebuyers will have to navigate the complicated home loan process and a big help in successfully achieving that is getting pre-approved for a loan.
Securing home loan pre-approval not only sets a clear budget for your property hunt, but also gives you a competitive edge in the market and accelerates formal loan approval.
Pre-approval is essentially a preliminary green light for a lender, indicating their willingness to grant you a loan up to a specified amount. This is based on an assessment of your financial status, considering factors, such as your living expenses, liabilities, credit history and employment status, to determine your ability to repay the loan. It provides a snapshot of your borrowing power and demonstrates to sellers that you are a bona fide, qualified buyer.
Obtaining pre-approval can streamline the buying process. Once you find your dream home, you typically only need to provide updated payslips and bank statements to proceed with the loan, eliminating the need to go through the full loan approval process again. While most pre-approvals are generally valid for up to 90 days, many lenders allow extensions if you submit up-to-date financial information, e.g., payslips, bank statements, etc.
While pre-approval can be a big help, it's important to note that it’s not a guarantee your loan will be approved. Final loan approval is usually contingent on meeting a satisfactory property valuation by the lender. If the property’s valuation falls short of the purchase price, you may need to increase your deposit. Additionally, any significant changes in your financial situation – like changing jobs or spending your deposit – can affect your approval. It’s also important to know that each loan application can affect your credit score, so it’s best to seek pre-approval from only one lender at a time.
If you’re hoping to secure a home loan, consider the following pointers to help get you there:
Obtaining pre-approval for a home loan provides clarity on your borrowing capacity, helping focus your property search on affordable options. It gives you a competitive edge by demonstrating to sellers that you’re a serious buyer with secure financial backing. It can also streamline and accelerate the buying process. Additionally, it uncovers potential credit issues early so you can avoid surprises down the line. With a little planning and by following the suggestions above, you can be best situated to secure a home loan and one step closer to owning a home.
At Ascent Accountants, we can help get you financially structured for what will likely be the biggest purchase of your life. If you’re navigating the property buying process, reach out to our team for expert financial advice and support. Contact us today to see how we can help.