Well – you’re thinking about getting pre-approved! That’s a great start and while a lot of other broking firms aren’t keen on pre-approvals. We are!
Why? Because:
- Then you can be really competitive when going up against multiple offers which is common right now
- Then the bank has agreed that they are happy to lend to you with your circumstances and then the only variable is that they also have to be happy with the property
- Then you can also put a shorter finance time frame typically than those not approved.
Win. Win. Win.
So – how much should you get pre-approved for?
Option 1. You Choose
You specify the maximum price you’d want to pay for the dream property. Think big here, if it was perfect in every way, what’s the most you’d want to go to? If it was $10k more than that would you still look? If so push that price higher.
Getting a pre-approval for an amount higher than you want to spend is actually really sensible. If you say you want to spend more than that $500,000 but your spend $515,000 your pre-approval may not be the right product, the interest rates may change for the worse or worse still you may not be able to purchase. But get pre-approved for $500,000 and spend $420,000 – happy days!!
Option 2. Deposit Limited
Your broker determines the maximum amount we can get you pre-approved for based on your current deposit amount and this sets your maximum price.
For example – a good rough rule of thumb right now is $40,000 savings can be suitable up to $400,000 for a Tasmanian first home buyer buying an established property and taking advantage of 50% stamp duty.
Option 3. Income Limited
Here your broker determines the maximum amount we can get you pre-approved for based on your current ingoings and outgoings (debts, liabilities, credit card limits, income and living expenses determine this).
If in doubt? Ask your broker what options 2 and 3 look like as maximums and let them put a pre-approval amount in place that is (wherever possible) higher than you want to spend so you can go in confidently with your offer.
Option 4. A mix of two and three
Option 4 is a hybrid of Option 3 and Option 2 where we don’t go above what you are limited to by income – but we project forward to a future deposit amount.
Now usually speaking when we submit for a pre-approval we can leave out things like conveyancing costs as you can continue to save for these up through until settlement – but – the bank want to see you have the savings to contribute towards the property you’re going to buy.
When you’re adding into your savings quickly and also want to know what your pre-approval may look like a couple of months in a advance if you can secure a gift declaration from say a family member to say that they can give you an additional amount – then we can get you pre-approved for that price provided:
a) you know that if you need that gift you can drawn on it
b) OR you don’t spend above what you have your own savings for – and we can show you what that looks like
c) OR you know you can save that amount prior to settlement
If in doubt on this one please just let us know and we’re happy to step you through it.