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.