Do I need a preapproval?
A home loan pre-approval basically says “here you go, you can borrow this much, according to our borrowing criteria”, essentially it’s a letter from your chosen lender that says that they like you as a borrower, confirms your loan amount and provided the property you desire is suitable to the lender you should be all ok.
It means the lender has looked at your credit and employment history and considered your income and expenses and they all line up with their comfortable policy.
In some cases all you will need then; to get your final approval, is for the lender to carry out a property valuation and you’re set.
Some preapprovals are better than others, however; and you should always rely on a fully assessed preapproval before you make any offers. What does this mean – well this means the lender has looked at all of your information and a credit assessment has been completed. There are instant preapprovals that can be completed online and directly with some lenders – but they’re nothing more than a computer response without any checks and confirmations. You can imagine how easy it is to come unstuck with these.
So, should you get a preapproval?
In most cases I say absolutely yes. It gives you certainty and comfort which is always ideal when you’re negotiating a price for your new home. It also removes some of the stress from the buying process, as you aren’t waiting for that final answer for quite as long.
Your broker will help guide you towards the better lender for your situation & typically we wont submit your loan unless we’re confident it will be approved. But even then there can be unknowns that cause us issues, so better to deal with these before you are in a cooling off period and time becomes crucial.
Now, once you have your preapproval you should not take out new credit, or change your financial circumstances – which means changing your job or becoming self employed – even if the offer is too good to refuse. Wait until you are certain of your finance and comfortable with your new loan before making any major changes, or risk the lender saying no.
Full article from the Western Weekender magazine here: