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Getting A Pre-Approval - Why You Need It?
What is a Pre-Approval?
A pre-approval is the commitment from a lender stating an amount they will
allow you to borrow. This is NOT a full-approval, therefore you still have
conditions.
Conditions will usually be:
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Valuation
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Mortgage insurer's approval
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Any missing documentation i.e. pay-slips.
Note that a pre-approval is free of charge and does NOT bind you to getting the
loan with the selected lender.
Why do you need one?
Buying a property takes time. In SA as part of a contract of purchase, a real
estate agent is required to give 10 workings days to get your finance. In the
contract of purchase you MUST enter a finance clause if you are borrowing any
part of the funds to purchase that property. Once the finance clause is up you
must be at full approval stage.
If you already have a pre-approval before hand you will quite easily get a full
approval within those 10 working days. If you don't have a pre-approval you may
go over the 10 days and miss out on the property. Getting a pre-approval
beforehand makes you more acceptable as the buyer to the real estate agent; as
you are a "qualified buyer" and they know you are serious. Your conditions to
purchase the property will sound better to a vendor as well, as other buyers
may need to sell their homes to get finance and other's may not have their
finance together at all.
A pre-approval also protects you, and most importantly you have a clear idea of
what you can borrow, what you can afford, and what you can spend.
When to get one?
As a serious property buyer you need to get a pre-approval prior to
looking at any property. A pre-approval can last for up to 3 months, and can be
extended if you haven't found the right property.
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