Start with a conditional approval
Competition for property can be fierce. Knowing your capabilities & positioning yourself to strike when the right property becomes available will put you ahead of the pack.
Sydney auction. Source: dailytelegraph.com.au
What is conditional-approval?
- Sometimes referred to as an approval-in-principle (AIP), conditional-approval is a general indication of how much you’re able to borrow based on the information you provide to your lender.
- Although subject to terms and conditions, a conditional-approval basically gives you the green light on your home loan even if you’ve not yet decided on a particular property.
- The amount of the conditional-approval is usually determined by your ability to meet the loan repayments.
- Most conditional-approvals are valid for three months but can often be extended to 6 months.
- Just remember even with your pre-approval, your purchase must still meet all of your lender’s requirements prior to obtaining final approval (including valuations, if applicable).
Why obtain conditional-approval?
Peace of mind
A conditional-approval gives you the confidence of knowing how much you can borrow when buying a property. When you use a credit adviser to assist with the process it will also mean that you’ve had an expert perform a preliminary assessment of your capability to service the proposed debt and an analysis of whether the proposed scenario is not unsuitable (this is the term ASIC uses) given your financial objectives and characteristics.
Jump the queue
When your finance is conditionally-approved it enables you to seize the opportunity and act quickly when you find the property you want. As the time proven adage goes: The early bird catches the worm!
Stronger bargaining power
The process of gaining a conditional-approval will require you to review your financial capabilities and will often entail a valuation being performed on the property proposed for purchase. The clarity that comes from understanding one’s own capabilities better and the potential weaknesses of the property can sometimes help you negotiate a better price with the seller.
Ability to bid at auctions
Under the conditions of a cash contract, a pre-approval allows you to bid at auction for the property of your choice. However, you will still be responsible to meet the rest of your obligations under the contract if unconditional approval is not obtained. In addition to seeking financial advice about your capabilities to complete the purchase, you should seek legal advice on the contract before bidding at an auction.
How do I get started with the conditional approval process?
The team at Naritas are experts in delivering timely guidance & finance approvals. We have over 100 lenders on our panel & a high quality team of dedicated advisers to steer you efficiently through the approval process.