Getting conditional approval before starting your search for a home is important. Firstly, this approval allows you to look at homes, and enquire with self-assurance. In addition, it lets you consider options, and then create a short-list. So, how can you use conditional approval to your advantage?
The Main Points We’ll Cover
+ Agents and vendors – conditional approval qualifies you as a serious buyer.
+ Budgets – with conditional approval you can focus on property you can afford.
+ Private sales – you can put in a subject to finance offer.
+ Auctions – you’ll confidently inspect property, then arrange finance.
+ Lenders – this form of approval has varying
+ How to apply – understanding when to apply and the process.
Agent and Vendors
Many people who attend home inspections aren’t there to buy that particular house. On most occasions, open home visitors are getting a feel for the market and doing their research. Some, are also just seeing how the other half live.
However, when you arrive with conditional approval, you place yourself in a different league to these people. Agents and vendors view you as a serious buyer. Consequently, you’re showing them you’re someone willing to negotiate.
Conditional approval keeps you grounded. Therefore, rather than looking at property beyond your means, you focus on homes within your budget. Knowing what you can afford stops you wasting time and drooling over unaffordable homes.
If you’re looking to buy a home privately, then you can put in an offer ‘subject to finance approval’. Just make sure that the offer is within your budget and approval timeframe. The timeline needs to be within two to three weeks to give your lender time for full approval.
When keen on a property going to auction, then getting conditional approval is vital. Arranging your finance before auction enables you to bid confidentially. Although, you need to be aware of market values and stay within these. Otherwise, you may find your lender’s value is below what you’ve agreed to pay. Therefore, you’ll need to find funds from elsewhere to make up the shortfall.
Countless lenders use different terms for conditional approval. Particular terms you may encounter include pre-approval or approval-in-principle. All of these names describe the same concept. While it is confusing, you can think of these terms as:
+ An enquiry that proves your financial position.
+ A guide, not a guarantee, from a lender as to how much you can afford to borrow.
How to Apply
It’s best to apply for conditional approval when you’re seriously looking to buy a home. Why? Well, conditional approval is valid for a specified period – usually 90-days from the date of application. So, it’s important you don’t apply too soon.
Additionally, it’s also vital that you’ve:
+ Calculated your borrowing capacity using an online calculator.
+ Determined home loan repayments based on your borrowing capacity.
+ Worked out how much you can afford to repay each week.
+ Studied home loan types.
+ Reviewed the market and narrowed down property types and locations.
+ Saved the required deposit.
Once you’ve established these factors, then it’s time to review lending packages. You can do this by contacting lenders directly, which can be time-consuming. Alternatively, you can contact a mortgage broker, who does all the hard work for you.
After you’ve found the right lending package, then it’s time to apply for conditional approval. At this time, you’ll need to supply your lender or broker with proof of your income, assets, and debts. They’ll also want information on the property – dwelling type, postcode, and purchase price.
Your lender will then crunch the numbers, and consider the property. If everything stacks up, then you’ll get conditional approval. Of course, this is subject to several conditions. Accordingly, be sure to ask what these are and discuss them with your lender or broker if you need clarification.