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Whether it is your first or fifth time, purchasing property is always an exciting occasion. However, we have seen that all too often, this excitement can quickly turn to stress if you do not have your ducks in a row from a lending point of view. Spending the most amount of money you ever have or potentially ever will can be a lot to wrap your head around and this, combined with the uncertainty of navigating unfamiliar financial systems and the sense of being reliant on a third party to bring your dreams to life – well, it’s a lot to take on.
When are applying for a loan, there are three major hurdles that often cause the most amount of stress:
- Attaining approval
- Getting everything sorted in time for settlement
- Understanding all the various lending products, options, and processes
Attaining approval is when the bank commits to providing you the loan based on your financial position and the property you have purchased.
Getting everything sorted in time for settlement includes attaining loan approval and signing loan contracts well before the settlement date. While you may not want to delay taking control of the new property, it is important to negotiate a settlement period that is going to give you enough time to complete this without running around like a headless chook.
Likewise, you should also take the time to explore and understanding what lending products are available in the market and what suits you best. This shouldn’t be overlooked, because if not done properly you could end up with a loan or lender that doesn’t meet your needs or is sub-par to others available in the market.
So how does a pre-approval help?
Simply put, a pre-approval helps mitigate these stressors by applying and securing a lender before you have found a property. The lender will assess whether you meet their lending policy and can repay the loan. Then, if all is ok, they will then issue a pre-approval on the condition that you buy a suitable property which means you have a lot less to worry about when the rubber hits the road.
Going through this process before buying a property:
- Gives you confidence that you can attain approval and know how much you can really afford to purchase / borrow
- Reduces time to process your application once you have purchased a property
- Gives you time to educate yourself on what lending products are right for you