Pre-approval or no pre-approval

U

UrbanPlanner

Hi guys, just some queries regarding whether its worth it or not to get a pre-approval done.

i have engaged a MB and after speaking with him, he said that unless I have 10% deposit (which i may not, but wont be far off it) a pre-approval isnt worth the paper its written on. He said that the only benefit of having it is that it gives REA a bit more confidence when you present them with an offer.

However i've spoken to a couple of agents (just enquiring about properties) and we got onto making an offer before a property goes to auction. The REA said that as long as I have pre-approval then I can make an offer before the auction.

So how much weight does a pre approval carry when making an offer? Or is it only useful if you want to make an offer before an auction.
 
Hi,
I am also from Perth. I had pre approval for my 2nd and 3rd IP. But still it took nearly 3 weeks to get unconditional approval. For my last IP, I did not have pre approval and it took the same time to get unconditional approval from bank. So I think it does not make any difference. R E Agents also don't care, as long as you are ready to put your offer on paper. Only thing is- it gives you more conficence. If you have pre approval, you know your limit and put an offer with confidence.
It's my experience.
Thanks
 
I always get a pre-approval before going IP shopping.

It provides you your purchasing budget, which in turn dictates areas & what you can buy.

When making offers it gives you the advantage over another offer subject to finance from both a vendors perspective plus also the REA's perspective. The REA works for the vendor and is ultimately paid by them so it entices them to present your offer in a better light over similar offers not finance pre-approved.

This last IP I purchased that settles next Tuesday, finance went unconditional within 3 days which was the time it took for the banks valuer to inspect property.

I hope this helps.
 
Hi

See I have the exact opposite approach

If the deal is easy peasy and we have big deposit etc, a pre approval is usually not that useful.

However, in ur case, a strong pre approval with the right lender does indeed hold water subject to vals etc. This doesnt mean u can go unconditio on that, but seeing you are in WA the O&A process usually has a finance clause attached. In NSW as an example its not like that and a pre approval can be useful depending on the lender.

ta
rolf
 
I get pre-approvals done for my OWN peace of mind. The single most important thing when it comes to buying a property, in my opinion, is having the finance. If you don't know how much the bank will lend you, you may invest a lot of time looking and think you have found the property, then to be sorely disappointed when you realise you can't get the finance to buy it!
 
jigglypuff said:
I get pre-approvals done for my OWN peace of mind. The single most important thing when it comes to buying a property, in my opinion, is having the finance. If you don't know how much the bank will lend you, you may invest a lot of time looking and think you have found the property, then to be sorely disappointed when you realise you can't get the finance to buy it!
Click to expand...

Hi

In many cases u dont need a pre approval to see how much u can borrow. Your banker or broker should be able to give u something useful in writing.

Sometimes pre approvals can burn your chances of getting a deal across the lien, especially where we have high lvrs or a busy credit file. Your broker should be able to advise you on this after you have provided them with a copy of your credit file.

ta
rolf
 
thanks guys!! I think the reason the MB told us not to worry was because we plan to borrow far less than what the banks will give us - he worked out the banks would lend somewhere around 670k and we are looking for a property around 430k max, so getting finance should be straight forward? right?

In saying that though, if we were to get pre-approval, would this then mean that our offer could be subject to a satisfactory building and pest inspection only? and we wouldnt need to have the finance clause? Or is it just safer to include it just in case? As Rixter said, this may give us any advantage in the eyes of the REA?
 
It's better to have a finance clause because most lenders will usually want a valuation if the lvr is over 80%. while it is unusual for the valuation to be a problem when purchasing it doesn't mean there can't be a problem. You don't know what you don't know so to be safe if you can have a subject to clause it gives you a chance to pull out if there is an issue with the valuation and subsequent loan approval. That said if it's a pre auction offer they may want you to waive your right to a clause / cooling off period. This is the risk all bidders take at an auction though. If the agent requires your offer to be binding ie with no clause or cooling off period then you should definately get a real pre approval with the only approval condition being satisfactory valuation.
 
Don't take anything for granted and don't forget Murphy's law - anything can go wrong. We recently had an approval complete with valuation with one lender and client decided to switch to AMP however their valuer came back saying that there was some concern that this Sydney unit was a case of two tier marketing and the valuation was rejected ... last minute panic trying to resurrect original offer.

I've known CBA to issue loan documents (you can't get much more unconditional) but without valuations completed and then the deal goes belly up.

Not all pre-approvals are created equal - some are not worth the email they are printed on. Your broker will know which lenders can be best relied on.
 
And to add a further dimension to the process, even with pre-approval from the lender, the deal can always fall over due to the LMI'er not liking you for one reason or another.

Boods
 
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