There's nothing quite like shopping for a new home, and home loan pre-approval gives you peace of mind that you're considering properties within your budget.
It's rare to get something for nothing these days but home loan pre-approval is one of those hard-to-find benefits that won't cost you anything.
A critical first step
No matter whether you are looking for a home or investment property, purchasing property is always an exciting step. Perhaps that's why we tend to focus on checking out different properties before shopping around for a loan.
However there are good reasons to speak with a lender long before you start wearing out shoe leather at 'Open Home' inspections.
Many lenders provide home loan pre-approval, and it gives you an indicative guide of how much you can afford to borrow. With a clear spending limit, it's far easier to narrow down those properties that are likely to fall within your purchase budget.
This doesn't just save time, it's also an important financial safeguard. With home loan pre-approval in place, you can try to avoid the potentially disastrous situation of making an offer - or worse, paying a deposit on a property, only to discover you cannot secure funding to complete the purchase.
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A must when buying at auction
In fact, when it comes to buying at auction, having home loan pre-approval in place is essential. As a general rule, once the hammer falls there is no cooling off period, and if you are the highest bidder you're committed to the purchase. That means you cannot afford to leave funding to chance.
Home loan pre-approval is also a handy tool when it comes to price negotiations for properties sold through private treaty. Mentioning you have home loan pre-approval under your belt is more likely to indicate to selling agents you are a serious contender, and this can add weight to any offers you make.
Know exactly what home loan pre-approval involves
A key point of home loan pre-approval is that it is not for an indefinite period of time. That's fair enough as your circumstances, and the home loan market, can change rapidly. This being the case it's important to have a clear idea of how long your home loan pre-approval is valid for.
Note too, pre-approval is simply an indication of your ability to borrow funds from a lender based on the information provided. It's not the same as final approval, which can only be given once you have chosen the property you believe is right for your needs and made a formal loan application to the lender.
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