It may not be the most creative or exciting part of the property hunt, but finding and locking down the right home loan can make a real difference to your ability to snare the dream home you’ve been waiting for.
Here’s what all home buyers need to know about home loans and the benefits of arranging their pre-approval early on in their search.
When is the right time to start looking for a home loan?
Unlike the eternal question of ‘which came first, the chicken or the egg?’, the question of ‘should I start looking for a home loan or home first?’ is not a complicated one.
The real question you should be asking yourself is: How prepared do I want to be?
There’s nothing stopping you from looking at homes first, or even doing both at the same time; however there are some clear advantages to looking, preparing and applying for a home loan before actually walking into your first open inspection.
Arm yourself with pre-approval
Getting a lender to ‘pre-approve’ your home loan means knowing that you’ll be able to borrow the money you need, based on your current circumstance. Almost all mortgage brokers, lenders and real estate agents would agree that you should secure pre-approval before you make any offer on a property.
During the pre-approval process, your credit file is checked, your pay is verified and your behaviour as a customer is stacked up against the bank’s minimal requirements.
1. Shop with confidence
Knowing you’ll be approved helps you shop for homes in your attainable price range and make an offer quickly – which can be tremendously helpful in securing properties in tightly-held markets.
2. Have a limit, know your limit
Knowing your limit ensures you do not over-commit beyond your borrowing capacity – something that can be a trap for property purchasers as property prices are increasing.
3. Haggle power
Having a limit also allows you to really talk price with the agent. Say you see a home you want but it’s just out of your lending range. If you tell the agent that you’re committed, ready to buy, have a pre-approval for this amount and can buy as soon as the vendor agrees, the vendor might just be motivated to take your lower offer in exchange for getting the deal done immediately.
4. Stress less
Making an offer and purchasing a property is busy and can be stressful. By at least getting all the finance preparation done before then, when you do find a property you can focus on that – rather than scrambling on the financial details at the same time.
Although a pre-approval usually lasts 90 days, just doing one will give you the confidence to know what to expect when applying for a home loan and also knowing that you can get a loan after that 90 days with no issues provided your financial situation has not changed.
As a buyer, the property game can be a very competitive one. Arranging pre-approval before you seriously start your search can help you pull in front of the pack.
For more advice on how to get onto the property ladder sooner take a look these tips to save for a house deposit in a low rate world and our first home buyers guide to the extra costs of buying a home.