First home buyers are continuing to stake their claim on markets across the country with many usurping their competition by being better prepared to purchase.
The latest Australian Bureau of Statistics figures show that about 18 per cent of all housing finance commitments is to first homebuyers.
Lenders now require more information, including a realistic assessment of living expenses, before determining whether to approve or deny a property loan.
Of course, the vast majority of home buyers and investors need finance to purchase property, but the one group who needs it the most is first-timers. Whereas, upgraders and investors might have some equity they can draw on to sweeten a deal, prospective First Home property owners generally do not, which means they have strict price points that they can afford to buy in.
The problem often is that they don’t know what those financial goal-posts are before they start searching.
While generic calculators can be useful, they are no substitute for an actual financial assessment of someone’s borrowing capacity, which generally can lead to a loan pre-approval.
What actually is a loan pre-approval?
A loan pre-approval is when a lender has provided provisional approval for a borrower up to a certain figure based on a rigorous assessment of their finances.
It’s important to understand that it’s not an approved property loan so you can’t go all crazy.
The lender will still need to have the property valued, as well as complete all the required paperwork, before they will approve a loan on that specific property.
So, you might be asking yourself what’s the point of a loan pre-approval at all?
Well, you see, it provides a level of certainty around what price you can afford to pay for a property as well as gives you confidence that your loan application – subject to the property valuation – is likely to be approved.