If you're looking to buy a property in this current fast-paced property market, you'll need to be ready to go and make an offer as soon as you see the property of your dreams. Having a home loan pre-approval is key to reducing delays and proving your suitability as a buyer, and your pre-approval lapsing could mean you lose out on the perfect property. We take a look at what is involved in the home loan pre-approval process, how to get an extension and the recent changes in Australian regulations that could affect your property purchase.
The home loan pre-approval process
When it comes to buying a property and securing a mortgage, having a home loan pre-approval is a crucial first step. This will give you confidence around how much you can borrow, and put you in a position where you can make an offer as soon as you find a property you want to buy. Most home loan pre-approvals are valid for 90 days and after this period has passed, you can apply for an extension so you don't have to start the process all over again.
Getting a pre-approval extension
There are so many reasons why property buying timelines can drag out, and a hot property market with low stock levels is the main reason you might need an extension on your pre-approval. With the recent lockdowns across NSW, Vic and the ACT, it has been difficult for buyers to view properties in person. And with many buyers uncertain about buying a property they haven’t seen, pre-approvals have lapsed.
If you have already successfully completed your home loan application, you will be able to obtain an extension by providing your latest payslips to show your income has remained the same. By doing this you will also be able to avoid any policy or borrowing changes that could impact your property sale. For most lenders, a pre-approval extension is a straight forward process.
Recent home loan lender changes to be aware of
With rising risks in home lending, the Australian Prudential Regulation Authority announced new measures in October 2021, to increase banks' loan serviceability expectations. You can read more about the home loan lending changes and how borrowers will be impacted. Essentially these changes mean borrowers will need to show more income to support the loan amount, or reduce the loan amount to support the latest lending changes.
Can you extend your home loan pre-approval more than once?
If you currently have a pre-approval in place, you can extend it once for a further 90 days, but once that extension expires, you will need to commence a new loan application. This means your new application will be subject to any new policy changes that have come into effect since your original approval was granted.
Because these lending changes are coming into effect very soon, if you already have a pre-approval in place, it's important to make sure you keep your pre-approval valid so you're not affected by the changes once it expires. Some estimate that it could reduce borrowing power by around 5% and it could see a big reduction in the number of mortgages approved.
Top tips for buying in a hot property market
If you're already in the property market, losing out on your dream property could be more expensive as well as disappointing, particularly if home loan policies change between when you originally applied for the loan to re-applying after your pre-approval expires. Here are our top tips for buying in a hot property market;
Do your property research prior to obtaining your pre-approval. Setting your property expectations before hitting the market will ensure you know what you can and can’t afford.
Have a list of second choice locations and property types so you can quickly change strategy if property prices increase quickly.
Be ready to act quickly. With most properties only available via private viewings, ensure you have flexibility in your diary to book appointments throughout the week rather than waiting until Saturday.
Work with an experienced mortgage broker like Mint Equity to ensure you secure the best home loan pre-approval with your maximum borrowing capacity so you can make confident offers on properties and beat the competition.
Working with an experienced local mortgage broker
There is a big difference between an online mortgage broker and one with a local presence. Often online mortgage lenders often have staff based overseas with limited knowledge of the Australian property market, so working with a local mortgage broker with Australian based staff like Mint Equity is key to getting the right lending advice.
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Photo by Kate Trifo from Pexels