Holding pre-approved finance doesn’t mean an automatic home run when purchasing a property, you will still need to check all the fine print when applying for a mortgage.
Finance can, and does, fall over at the last minute, putting house sales in jeopardy and a trail of people in an awkward position. Most often this is due to a bank declining an application when they take a closer look at the details—including the home’s value, the type of pre-approval obtained by a buyer and even the type of property being purchased.
A pre-approved loan is a useful tool for buyers to have, as it allows them to know how much they can spend, but it’s success ultimately depends on meeting checks carried out by the bank—it doesn’t mean you can make an unconditional offer on the spot.
Banks weigh up many factors when approving a loan and assess each property on its own merits—including the house’s online value, the offer price, property type (eg. apartment), and the type of sale (auction, private sale). Checks happen during financial due diligence or by assessing draft sale and purchase agreements in unconditional offer situations like an auction.
Often the size of the offer vs the online value of the home can trip people up. As a general rule, if a deposit is over 20 per cent, the bank won’t ask for a property valuation, but they reserve the right to ask if:
- an offer appears too high compared to their own online investigation,
- if a deposit is less than 20 percent, or
- you are part of a private sale.
Pre-approvals can also be withdrawn if your personal situation changes (like a job loss). It’s important to work with a trusted mortgage adviser who can explain these conditions and what circumstances could trigger the need for a registered valuation.
We recommend buyers:
- have their approval in writing,
- double check the fine print, the conditions and when the offer expires,
- find out what type of properties you can and can’t buy (sections and apartments have restrictions), and
- seek the help of an impartial mortgage adviser who can explain it all in plain English and double check the fine print.
Always check with your adviser before making any property decision, to avoid being caught out and potentially losing your dream home at the last minute.
Please contact us for help with the pre-approval process.