On a lookout for your dream home? Of course, dreams don’t come cheap; but it is possible to secure finance for your property, making it much more achievable than it may seem.
When you decide to buy a property, getting it financed is a major worry. Many a buyers are left stranded when they cannot borrow enough to cover the purchase of their chosen property. It is possible to prevent this situation by knowing how much you can borrow. While you can check your borrowing capacity using an online calculator, go a step further by having your loan pre-approved to avoid any last minute hassles.
Do I really need a loan pre-approval?
Having your home loan pre-approved has many advantages and can give you an accurate view of what you can borrow. It also helps you prepare for the final approval when you zero-in on a property.
- Getting a loan pre-approval is absolutely free and valid for up to 3 months.
- With a pre-approved loan, you know exactly how much you can spend. This makes it easier to shop around for a property, as you know your limits.
- Seller agents take you more seriously when you are armed with pre-approval, as they know you can afford the property.
- As clearance rates at auctions swing over 70% in Sydney and Melbourne, having pre-approval means you know exactly how much you can bid. Read here to prepare yourself for an auction.
- With home loan pre-approval comes better negotiating power. Yes, many sellers will be willing to lower down the price, as they know you are a serious buyer and will be able to pay if the deal goes through.
How to get your loan pre-approved?
Getting a pre-approval is easy as most banks have online forms that barely take few minutes to fill up. However, don’t rely on pre-approvals that are generated in five minutes and are not followed up by a meeting with the lender.
Once you fill the details online, pre-approval for your loan can take up to 24 hours or a week. You would be required to submit some documentation and may even be required to visit the lender to discuss your loan in detail.
25% loan applications are rejected for reasons as trivial as incomplete paperwork. Be organised or seek help from a mortgage broker to have your paperwork in line.
Keep the following documents handy to avoid disappointment:
- Salary slips or proof of income
- ID proof
- Tax returns
- Proof of genuine savings for at least 6 months
- Proof of assets and any other income
In case you are self-employed, applying for a low doc loan may be easier. Know more about low doc loans.
Whether you are a salaried employee or self-employed, here are 5 tips to prevent your application from getting rejected:
1. Maintain an unblemished credit history.
2. Do not switch employers as you file your loan application.
3. Have genuine savings for at least 6 months to build lenders’ confidence.
4. Do not apply for too many pre-approvals, as it will tarnish your credit file.
5. Get your paperwork in order.
Know what you want from your loan before you start shopping for one.
It always helps to seek assistance from experts. Get in touch with a mortgage broker to help you with the process.
What about the road from pre-approval to approval?
Once you have pre-approval, getting final approval for your loan is usually easy and not time consuming. ‘Usually’ because lenders’ decision is based upon a valuation of the property and verification of the information submitted by you.
Any change in personal circumstances during this period can lead to rejection. Know what not to do during your mortgage approval.
At HashChing, we understand your financing requirements and let you compare several competitive pre-negotiated deals online. Our expert mortgage brokers are available round the clock to answer your queries online within minutes for free.
By Vidhu Bajaj