When you’ve made the decision that you want to invest in a property – whether as an owner-occupier or investor, one of the first steps you should consider taking is securing a formal property loan pre-approval from your financial institution of choice.
- Securing a formal pre-approval gives you great negotiation power at offer stage; as it demonstrates to the vendor that you are in a genuine financial position to purchase and have the strong motivation to do so. An offer from a buyer with pre-approved finance will generally carry more weight and influence than an offer without this.
- It also assists you to research properties within the appropriate price range – saving you time and possible disappointment if you found your dream home, only to learn it’s out of your reach, financially.
- Furthermore, the closing period of your loan is shorter as you don’t have to wait for the bank to go through the entire loan application process, as you’re more likely to obtain finance quickly and the purchase process will be smoother.
Avoid non-formal, non-written applications – these includes fast “30 minutes-or-less” online applications or applications over-the-phone, these have far less guarantees and will come with many conditions that you must fulfil at a later date. Generally, these are used by the banks and lenders to produce sales not to offer reliable pre-approvals.
Don’t forget, unless the lender gives you an unconditional approval, they are still under no obligation to loan you money.
Conditional approval vs final approval: what’s the difference?
Unlike a conditional approval, a final or unconditional approval is given once all the banks loan conditions have been met. This is the final guarantee that you’ll receive finance for a property. A bank will only decline a final approval if they find a discrepancy that has been completely missed or they have reason to suspect something like fraud.
Once your offer has been accepted by sellers, you may have a set time period to get your finances in order. If you haven’t already done so, you can ask for your final approval at this time.
Here at Wright Place, we can recommend a mortgage broker who can assist you to secure pre-loan approval.