Precarious, preachy, preeclampsia, premature, prejudice, preposterous, pretentious – all negative words. But, when it comes to home buying, preapproval is a perfect word.
One of the most stressful parts about buying a home is worrying about whether the bank will approve you for a loan or simply wondering what you can afford. Pre-approval takes away that stress.
Applying for preapproval is normally free. It is just like a normal home loan application, except that there is no consideration of a specific property that a home buyer wants. As a result, the bank does the normal checks such as making sure that you have a good credit record; your savings history is sound; and maybe your employment situation is good.
Once the banks have run these checks, they will issue a home loan applicant with a letter which sets out how much they are prepared to lend. As a result, would-be home owners can go to auctions confident as to what they can afford.
Good mortgage brokers also know which banks are quickest at issuing pre-approvals so that, if you suddenly find your dream home mid-week, you can bid for it at the weekend auction.
Once you have made an offer for a property and it has been accepted, the only thing to do is to tackle the remaining condition the banks are normally concerned with – ensuring there is a satisfactory valuation of the property. Here, your broker liaises with the bank and gets them to send out a valuer (free of charge).
Once the valuation has come back okay, the bank will issue you with what is called full or unconditional approval and your lawyer can start making arrangements for you to take possession of the property.
Pre-approval is pretty prevalent for people in a predicament as to what they can purchase.
This article first appeared in http://www.thehomepage.com.au/