If you’re a first home buyer in Perth, you may be wondering what this term “pre-approval” is, why it might be important and whether you should go about obtaining one.
In fact, the process of obtaining a first-time home loan can be daunting enough without extra considerations and concepts being thrown into the mix. To help clarify everything for you, we’ll outline what a home loan pre-approval is and outline the benefits to obtaining one so you can best understand how you can get ahead of the game.
What is a home loan pre-approval?
A pre-approval is the process by which lenders look at the various financial factors of your particular situation to determine how much money they would and could lend you if you did end up applying for a mortgage loan. It is not a guarantee of a loan but it can be useful for a few purposes, not least of which is giving new homebuyers a more accurate idea of how much money they can afford to borrow.
Armed with this information and more confidence, they can then tailor their property search with a stronger understanding of what properties are realistically in contention.
Pre-approval vs final approval
It is important to note that the pre-approval is not the same as the final approval for a home loan. It does not guarantee that a mortgage approval will be provided and it also doesn’t lock in the amount that a lender may be willing to provide. (And especially not the interest rate.)
It is best thought of as a way of making a more informed home-buying decision and for providing a bit of a better understanding of what priced homes and houses you should be looking at based on what sort of home loans for first home buyers you can afford.
Benefits of a Pre-Approval
Many home buyers like to get a pre-approval for a mortgage so that they have a competitive advantage over other buyers in the market. A pre-approval indicates to sellers that you are a serious buyer, that you have considered the financial means necessary for purchasing the property and have already invested time and effort in the process.
From your perspective, and as outlined above, a pre-approval can help you save both time and money in the long-term. Instead of spending time looking at and searching for homes that are either too far out of your budget range for serious consideration or too low to appeal to you, the pre-approval gives you a good starting point from which to begin and conduct your search for a new home. First home buyers in particular may not really understand what sort of mortgage they could qualify for, so the pre-approval can be an essential tool for them before heading out to the market or even applying for an actual buyer mortgage.
Obtaining a pre-approval
Getting a pre-approval is similar in many ways to submitting an application for an actual mortgage. The lender in question will require you to submit relevant documents and financial records including income, in the form of payslips for example, expenses, through your bank statements, and provide information regarding other assets.
If all of this sounds a little hairy and scary to you, don’t worry – just reach out to the team right here at Loan Monster and we’ll help you the whole way.
Factors that can affect approval
It is important to bear in mind that changes in circumstances, especially financial, can affect whether the final mortgage approval is actually in line with the pre-approval. While pre-approvals are only valid for a set period of months, there can still be significant personal or market changes in the interim period.
Factors such as fluctuations in interest rates, your financial situation, expenses or dependents and real estate market conditions can all positively or negatively affect the approval.
Nonetheless, as far as a starting point goes, it’s certainly a very useful tool, especially for new home buyers.
Your first home might just be a phone call away…
The Loan Monster mortgage broker in Fremantle is your local, friendly, and highly professional team of mortgage experts.
All of our brokers not only recommend looking into a pre-approval for first time home loan seekers but are also happy to help you through the processes, one step at a time.
All you need to do is contact us and let us know what you’re looking for and how we can help. So, for more information about all things home loans for first home buyers, call us today!