Having a Pre Approved Home Loan will provide you greater certainty of what a lender will provide you, and gives you some level of comfort when you go house hunting, but how long does this last and what if the market or the lending criteria changes, what happens to your pre approval.
Pre Approvals are limited
Pre approval from a lender has a limited time frame, and right now 90 days may be the most time a pre approval will last, then you will need to update your loan application and provide more recent supporting information. This length of time you approval is valid may vary from lender to lender and when your approval expires it can be a lot of work for you and your financial adviser to get another approval, especially if you are going to an auction.
With the exception of time expiry, other factors can limit or even make your pre approval pointless so before you get a pre approved home loan, you should seriously look around and get a realistic understanding and expectation of what money can buy.
Have a realistic expectation
It can be all too easy to get a home loan pre approval, only to then start looking at homes and realise what your money can buy (or can’t buy) which can be disheartening because it’s human nature to want better or more than we can actually afford.
Get educated on what is happening in the property market and accept the fact that you may not be able to buy your dream home right now, but if you set your expectations right, it may be a less stressful process.
What can change your home loan approval?
As previously mentioned above, time can expire your approval and with such a buoyant property market you may not be able to get the same pre approved amount or even obtain a pre approval because.
- Interest rates have increased
- Banks have changed their lending criteria
- Property prices have gone up
- Your employment status has changed
- You have had a reduction in income
- Loan to Valuation Ratios have reduced
Home buying can have shifting goal posts
How much you could borrow will vary from lender to lender so instead of going around all the lenders, find a good financial adviser who can get you a pre approved home loan because they will know which lender at the current point in time will offer the most money.
Get educated and be flexible so when circumstances or market conditions change (and they will) you will better prepared to make good financial decisions.
Look at property websites such as trademe.co.nz and oneroof.co.nz and there is no harm in considering building a new home so you could go so far as talking to property developers. Know what something is worth, so you know a good buy when you see it, because if you do come across a good buy, it won’t last long.
Make the most of your pre approved home loan
If you have an approval, make the most of it because you may not get it again, and if you can, you may not get the same amount that was on offer. If you need a pre approved home loan, contact us anytime.