What is home loan pre-approval and should I get it?

A formal pre-approval is a critical step in purchasing property – it’s when a lender (bank) gives you an approved amount to borrow based on a full assessment of your financial situation.

Advantages of home loan pre-approval:

  • Give you some sort of “bargaining power” (check my explanation as below)
  • You’ll know exactly how much you can spend
  • You know what your repayments will be
  • Your final loan will be organised faster
  • There’s no cost to you

The reason why it gives you the bargaining power is because mostly the seller will only want “serious and quick sell”. Having pre-approval gives you some sort of “absolute advantage” when buying compared to those who haven’t got it yet. Pre-approval sometimes take up to 1-2 weeks for the bank to approve and some seller will only want a quick sell and do not want to wait this much of time.

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