Get Your Loan Pre-Approved and Pay Less for Your Next Property?
It is no secret that having cash in hand to purchase a property or a car has the power of lowering the asking price? Being able to make a written offer on a property and stating that the offer is cash and unconditional can generally result in the vendor agreeing to reduce thousands of dollars from the asking price! Why is this the case you may ask?
Well It’s simple really. A cash contract:
- Ensures the vendor that their property is sold and therefore they can move on to purchase a new one as they have certainty on their sale;
- Ensures that the vendor does not waste time and money on an offer that 3 to 4 weeks later could fail due to finance;
- Reduces the time needed to complete the sale as the timeframes to arrange funding are drastically reduced; and
- Gives the agent certainty of a sale and therefore a commission. Depending on the market and the property, agents may encourage a seller to give a higher consideration to a contract which has an assured finance position as opposed to one that needs finance approval.
Time and time again, we have seen situations where a property is sold at auction below a seller’s expectation, when property prices are stagnant. Irrespective the Seller has a guaranteed sale and the Buyer a bargain price.
So, your next relevant question is obviously how do I create a situation where I can negotiate a property contract with cash in hand when I don’t in fact have all the money and I need a Finance Loan?
Once, again, it’s simple! If you obtain a pre-approval from a Financial Lender prior to negotiating your property, then in commercial terms, you have a firm commitment from the lender to provide a loan for a specified amount before you find a property!
What is a Pre-Approval and How Does It Work?
A Pre-Approval is a preliminary application that is submitted to a lender prior to finding a property to purchase. The lender will use this preliminary assessment to confirm your current financial situation, general credit worthiness, the type of loan you are applying for, and the maximum amount the lender will provide you.
When applying for a Pre-Approved loan you will need to provide documentation, such as proof of deposit, proof of income, current monthly expenses, and any current credit commitments like personal loans or credit cards.
So why get a Pre-Approval?
Not only does it help mitigate the service level times for a lender to assess the application, but also avoids incurring unnecessary costs such as solicitors’ fees, building and pest inspection fees, soil tests fees, only to have the contract falling over due to not satisfying the finance clause.
As well as the above, the Pre-Approval provides a clear indication of what your purchasing limits are, so you can enter the property market with confidence knowing exactly where you stand from a lenders point of view.
That way, you are not setting yourself up for disappointment when you go back to the lender after finding your dream home, and the lender turns around and does not lend you the money.
Lastly, and most importantly, from a Real Estate Agent and Sellers point of view, it shows the seriousness of your offer, because you have gone and taken the extra step to find out what your maximum purchasing abilities are.
How to start process?
Speak to one of Brisbane Home Loans Finance Specialists about booking an appointment. During this appointment Brisbane Home Loans Finance Specialists will be able to determine what your short to long term goals are, where you currently sit financially, and what needs to be done next to get you into that dream home or investment property.
Are there any conditions of a Pre-Approval: what are the conditions of the Pre-Approval?
The general Conditions of Pre-Approval in the market is;
- That all eligibility information supplied to the lender remains true and correct during the Pre-Approved period.
- The lender has received all documentation necessary to verify deposit, security, assets, liabilities and income.
- The lender is satisfied with the assessment (including the valuation) of the property being offered as security
- If over 80% Loan to Value Ratio, that the Lenders Mortgage Insurance will provide insurance for the lender. (The Lenders Mortgage Insurance premium is paid by the borrower)