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Do I look at the property first or the mortgage?

Do I look at the property first or the mortgage?

One of the biggest mistakes house hunters can make is to start looking for a property before locking in their finance.

Many people get so excited by the thought of buying their new home or their first investment property that they rush straight out to inspections.

Smart buyers, though, take the time to visit a broker or a banker so they can organise a pre-approval.

Here are six reasons why it’s important to organise finance before you place a bid on a property.

1. Know your limits

There’s no point looking at homes in the $750,000 range if a lender will only support you up to $700,000.

Finding this out up front will not only save you time, it will also stop you falling in love with a property you could never afford.

2. Leave yourself enough time


Even if lenders will help you buy the sort of homes you’ve been looking at, you could be in big trouble if you don’t lock in finance before making your purchase.

Getting a mortgage approval can be a surprisingly lengthy process – partly because unexpected obstacles often appear. The danger of submitting your application after the purchase is that your loan might not be approved before settlement. If that happens, you could lose the property, lose your deposit and have to pay the vendor’s readvertising fees.

3. Nip problems in the bud

It’s not uncommon for borrowers to discover they have problems on their credit file when they apply for a pre-approval.

These problems might prevent borrowers from qualifying for a mortgage until they’re fixed – which could take months. That’s another reason why you don’t want to leave your finance until the last minute.

4. Give yourself options

Another possibility with buying first and organising finance later is that there might be only a limited number of lenders able to approve a mortgage in your restricted timeframe.

That could force you to accept a home loan with a higher interest rate, higher fees, less flexibility or fewer features.

5. Discover any deal-breakers


Many people don’t realise that there are some properties lenders won’t touch – perhaps because of their size or design or location.

Lenders won’t extend credit unless they’re confident they will be able to get their money back. So lenders ask themselves: ‘If it turns out the borrower can’t afford their repayments and we have to seize their home, will the sale price exceed what we’re owed?’ If the answer is no, the mortgage won’t be approved.

The best time to discover a lender’s deal-breakers is before you buy a property, not after.

6. Improve your negotiating position

Sometimes it’s not the buyer with the highest offer who gets the home but the buyer with the securest offer.

Why? The reason is that some vendors want to make quick sales and can therefore be reluctant to do business with anyone without a pre-approval.

That’s why pre-approved buyers can have an advantage in negotiations over buyers who don’t have finance in place.

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