Why You Shouldn’t Let The Pandemic Put Your Plans For Pre-approval On Hold

Published by Otto Dargan on October 22, 2020
It’s hard to believe we’re in the middle of a pandemic with the Australian Bureau of Statistics (ABS) data shows that Australians secured $16.3 billion in owner-occupier loans in August 2020. This is a 13.6% increase in August, which is the largest rebound since records were established 18 years ago. Of these August loans, 12,302 were first home buyers, which is a 17.7% increase compared to last July. The largest increases were in New South Wales, Victoria and Queensland.

Australia’s property market is resilient 

Property prices did not dramatically decline as many commentators had predicted because: 
  • The ultra low-interest rate environment has made getting a home loan more affordable. 
  • There is a slow down in property supply, with a decrease in dwelling approvals. Even with fewer buyers in the market, supply remains low. 
  • Home owners are not being forced to sell their homes as banks are offering repayment holidays or other COVID-19 assistance for their customers. 
  • While unemployment is rising, younger people were more affected, especially those working in travel, education, hospitality, etc. A majority of this population are renters instead of home owners. 
  • The government stimulus like JobKeeper is keeping house prices steady. First home buyer incentives and HomeBuilder grants are ensuring a flow in demand for housing. 

Why should you get pre-approved during a pandemic? 

If you have stable employment and believe your circumstances are unlikely to change, then you might want to consider getting onto the property ladder.  A home loan pre-approval is a good first step towards buying a home.  Due to the COVID-19 induced recession, sellers and agents might be more willing to negotiate with you. 
  • It is essential to know how much you can borrow and whether you can afford to pay off the home loan in the current environment. 
  • Since there are restrictions on the number of people who can enter open homes, sellers might limit access to those who are pre-approved. 
  • There are fewer homes on the market since distressed selling is low. With limited stock, getting pre-approved is a signal to the seller that you’re serious and confident about buying your home. 
  • There is competition from other buyers who want to take advantage of low prices and the low-interest rates. 
  • Auction clearance rates are improving, and if you want to buy a house at auction, it’s important to get pre-approved. 
  • Getting pre-approved could help you to identify any potential problems that could prevent you from getting a home loan. This will give you time to address the issues.

What are the pros and cons of pre-approval? 

Pros  Cons 
Gives you an idea of how much you can afford when property hunting.  It’s not a guarantee that you will be approved. Multiple pre-approvals will affect your credit score. 
Smoother formal approval process.   It only lasts up to six months so have to take advantage of the pre-approval and find a property within this time. 
Having a pre-approval makes you a serious buyer.  Certain banks and lenders have unreliable pre-approval processes.
Drastic changes to your personal or financial circumstances could negate the pre-approval. 

Tips for getting pre-approved

  • Get your documents ready like ID, payslips, salary credit statement, bank statements, etc. 
  • Use our borrowing power calculator to get an estimate of how much you can borrow. 
  • Pre-approvals are only valid between 3 to 6 months, depending on the lender. If there are chances that your situation will change after pre-approval, you might want to wait. 
  • Lenders have restrictions on certain types of property and certain postcodes. Have an understanding of which properties are acceptable. 
  • Take the help of a mortgage broker who will guide you through the process and help you find the best solution. 
At Home Loan Experts, we have over 50 lenders on our panel.  Our mortgage brokers know the lending policies of each of these lenders and can help you find a home loan that suits your needs.  Are you looking to get pre-approved for a home loan? Call us on 1300 889 743 or fill in our free assessment form

labelCategory: Home Loan Articles