As the market looks ready to rebound this year, numerous prospective buyers are hoping to secure their slice of it.
Odin Mortgage – a mortgage broker that works with expats and overseas residents, and one of Milk Chocolate’s industry partners – has consequently noticed a surge in pre-approval applications.
“Savvy investors and experienced property buyers now understand that we are at a turning point with interest rate hike tapering, inflation coming under control and an uptick in housing demand from incoming migration,” says Martin Zheng from Odin Mortgage.
If you’re a local or expat buyer hoping to apply for pre-approval, here are four tips for making your application as smooth, stress-free and successful as possible.
1. Make sure your application is thorough
As part of your pre-approval application, you’ll need to provide certain information along with a number of documents – all of which demonstrates your ability to service your loan.
Along with filling out a pre-approval application form, you’ll be required to submit the following:
Identification
Proof of income (including rental income if you already own an investment property)
Employment verification
Evidence of savings
A breakdown of your living expenses
A list of both your assets and debts
Martin says this is where punctuality and attention to detail can make all the difference to your application.
“Provide documentation and respond to requests quickly so that the bank assessor does not need to pick up the file multiple times over a long period,” he says.
2. Remember the money isn’t yours – yet
Even if you’re given a certain amount to play with, that money isn’t truly yours to spend. There are still multiple parts to the process before you’re granted a home loan, and you’ll have to comply with several steps in order to secure your financing.
Your lender will also need to see a satisfactory valuation of the property you’re interested in to approve your application. Plus, you’ll need to consider other purchasing costs like stamp duty, legal fees and conveyancing. This is why any offer you make should be submitted ‘subject to finance’.
Also, remember that pre-approval is usually only valid for 90 days, so you may need to re-apply if you don’t find a suitable property within that period.
3. Be aware you might still get rejected
Despite your application seeming watertight, pre-approvals don’t always go through. Even home loan applications can and do get rejected after receiving pre-approval.
There are several reasons why, but in the majority of cases it’s because the lender isn’t satisfied you’ll be able to service the loan. Perhaps your income doesn’t appear to be high enough, your credit score isn’t overly favourable, or the property you’ve found doesn’t match the lender’s valuation.
“Other reasons include not passing the stress test because existing liabilities or expenses are too high,” adds Martin.
You may need to revisit whatever aspect of your application didn’t satisfy the lender’s criteria and resubmit.
4. Speak to an expert
Especially if you’re in a unique position – such as being an expat or self-employed – having expert guidance to help you navigate the pre-approval process can make all the difference.
“People who do not use a broker are often mislead by the banks who do not understand policies outside of their internal ones,” says Martin.
In the case of expats, for example, there may be additional criteria and required documents. This is because you’re dealing with foreign income and, if you’re buying a property in Australia, you’re likely going through the process remotely. In this instance, you may need witnesses for some of your documents.
“Speak to an expat mortgage broker to understand which banks are suitable for your particular geography and profession,” says Martin.
If you’re looking to purchase an investment property, expand your existing portfolio or find a family home, get in touch to discover how Brad and the Milk Chocolate team can help.
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