If you’re house hunting, chances are you’ve got every new property listing alert set up to reach your inbox the second it’s listed. You’re probably chasing agents and spending your weekends running from opening to opening. It’s an exciting experience but can be daunting. After all, buying a house is one of the largest investments you may ever make.
Keeping a level head and being realistic about what you can afford will certainly help guide the houses you should be inspecting. That’s where finding out how much you can borrow before you step foot into that dream home will ensure you’re on the right path from the start.
As well as managing your own expectations, in the current climate, securing finance for a home loan is much more difficult than it has been in the past. It requires a lot of thought in advance and is not as simple as just filling in an application form.
Pre-approvals don’t lock you into one product, they just give you comfort around your borrowing capacity. http://brickhill.com.au/borrowing-power-calculator/ Lenders now use benchmarks to safeguard against the future, so just because you can afford to make the repayment for a certain loan amount now, that doesn’t mean the bank will lend you that much. The amount you are pre-approved for is likely to be a reasonable amount that is reflective of your current and future income and expenses.
Pre-approvals are typically valid for 90 days, so you have plenty of time to house hunt. Even then at least one extension can be arranged in many circumstances. Armed with your pre-approval, you know what your price range is.
Having a pre-approval in place usually means that you’ll have better negotiating power when looking to purchase. Sellers often take pre-approved buyers a bit more seriously which may give you priority in the buying process. Further, you’ll have some bargaining power as you can offer a shorter settlement knowing your loan approval is already in place.
As a word of caution, if your circumstances have changed or likely to change, such as changing jobs, having children, spending your deposit, you should discuss with your broker or lender whether your pre-approval is still in place before you commit to a purchase. As the unconditional approval will require a valuation of the property, it is also preferable to have this completed before you sign the contract or at least have a “subject to finance” clause included.