There are many stages to becoming a homeowner, so much so that a lot of first time buyers can feel overwhelmed. If you too are confused about where to begin, your best bet is to learn the terms of the trade in order to prepare for the processes ahead. One of the ways you can do that is by familiarising yourself with the phrase “pre-approved home loans”.
If this sounds unfamiliar to you, you may have heard it before but under a different name: decision in principle, conditional approval, approval in principle, these terms and many others all refer to the same thing. Getting pre-approval may seem like a far off task for much later down the line, but in fact, it’s one of the earlier stages of your application. The issue is, with so much information coming from all angles, you may find yourself struggling to understand how you get pre-approved for your home loan.
Gain Confidence and Clarity
Pre-approval is the only definitive way of knowing exactly what you can and can’t afford. If you don’t know your borrowing capabilities, your mind and anxiety can run away with you, resulting in greater disappointment when you finally get your decision in principle. Therefore, it’s best to take charge and gain that clarity early on. By having a set budget in mind, you’ll be able to establish which mortgage is right for you, the length of loan you’re looking at, and whether your offer is likely to be accepted once you find your ideal property.
Visit the Right Homes
The moment you have a pre-approved home loan, you can begin to refine your property search. When a lot of first time buyers connect with an estate agent, it’s all too easy to set your parameters too wide, meaning that you look at many properties out of your realistic price range. Not only is that disappointing, but it’s also a huge waste of time. It’s better to be prepared so that you know what you can afford.
Better Negotiating Power
Imagine that both yourself and another potential buyer has put an offer in on a house, with one of you having pre-approval and the other not. Who do you think will instill more confidence in the seller? A buyer who is already pre-approved indirectly informs the seller that their finances have been checked, which in turn eases any concerns the seller might have regarding whether you can follow through on the offer you’ve made.
Identity Potential Issues
If you try to skip the pre-approval period, you risk running into problems later down the line. When you fail to review your financial situation, you unwittingly run the potential of jeopardising your mortgage application. On average, six out of ten buyers need to address problematic areas of their finances before they can proceed. In short, taking out a mortgage is work, with much of this work coming into effect before you actually begin your house search.
Mortgage advice isn’t something we’re readily taught, but that doesn’t mean you can make excuses for not educating yourself on the process. Now you know how to approach the early stages of the process, you’ll be better prepared for the journey to come.