Pick your priorities: finances first, house-hunting later
Shopping for a new home before you shop for a home loan is a bit like eating pudding before your main meal — it's sublimely sweet for a moment, but it's likely to leave you with a lasting belly ache. Here's how to avoid temptation — and the after burn!
Our wish list for that dream home usually doesn't quite balance out with our budget. We're tempted to aim too high — it's a dream home, after all! — and then we have to deal with the disappointment of discovering that we simply can't afford the house we've set our sights and our hearts on.
And it's all too easy when you've seen something you really love and want — those sweeping lawns with stylised shrubbery, that shiny chef's kitchen and wondrous wet room, or that fine architectural specimen in your favourite area. You soon find yourself rationalising about why you actually, well, deserve it (like that second dish of dessert!). And suddenly you're making plans to get it!
Now would be a good time to pull up the handbrake so that you won't find yourself in unmanageable debt. Debt — unlike dessert and those few extra calories — can last a lifetime. In fact, that dream home could end up a disaster if you don't deal with your finances first.
That's why your first priority should be getting pre-approved for your home loan and your house hunt. That Pre-approval Certificate gives you a good idea of what you can spend and where you should look. And it curbs the temptation to take on properties out of your reach.
On top of this, it gives you the confidence to make a firm offer to purchase (OTP), and sellers are more likely to accept your offer because you'll have the funds to back it.
And it only gets better. Pre-approval also proves to estate agents that you're a serious — and sensible! — buyer. The agents will love you, because in the current economic climate, they're often forced to 'sell' the same property several times over 'til they find a buyer who'll actually be able to afford a home loan. And they'd obviously prefer to show their listings to someone who's serious about buying and knows what they can afford.
And, joy of joys, the process of pre-approval is really not all that complicated and time-consuming — but it will show you all the financial issues you'll need to fix before you can go ahead with the hunt for a home loan and a dream home.
Through the pre-approval process, you might find that you need to clean up your credit record, or perhaps you need to provide better proof of income, especially if you're self-employed. And while that might set you back a few weeks, in the long run it's well worth doing, because a pre-approval will dramatically improve your chances of actually getting your loan application approved — and at a preferential interest rate!
And if you work with BetterBond, your chances will be boosted even further — our current approval rate (for clients that pre-approve with us first) is 90% of applications we submit to the banks on your behalf, while the open-market rate hovers around 35% at the moment.
So, make pre-approval a priority — and enjoy a long, leisurely pudding fest in your lovely new home!