For most people homeownership in an important step on life’s desired milestones. It therefore comes as no surprise that when you attain this achievement you are full of pride and a great sense of accomplishment. So, after you find the right house, what happens next? One of the most critical steps in the home purchase process is to receive financing for your dream of home ownership. As such receiving pre-approval becomes vital. But what is conditional approval and why do you need it?
What is conditional approval?
Conditional approval, or pre-approval is a step in the home purchase process. Pre-approval is when a mortgage lender approximates the amount you can afford to borrow for a home loan. Conditional approval is based on your ability to meet certain prescribed conditions. In addition, it is very important to know that conditional approval is not a guarantee that you will qualify for a home loan. However, conditional is still a very important step I the mortgage process. Simply put, pre-approval is approval for a home loan, that is conditional.
Before you look for pre-approval you have to consult with your financial advisor and save a deposit for you home purchase. Moreover, you need to look at your financial situation and create a budget that helps you stay on track. After this you can commence to look at homes on the market that align with your budget and expectations. Lastly, you can then start to research the various loan products on the market. Keep in mind that pre-approval typically lasts for a set period of ninety days.
Importance of the expiry date on your pre-approval
- Firstly, it motivates you to narrow down your search and gives you an incentive to find a home sooner rather than later.
- Secondly, it significantly minuses the chances of you returning to a lender and being denied a loan due to changes in your financial situation.
- Lastly, it gives a clear picture of your commitment to secure a home.
How do I receive conditional approval?
To start with, various lenders has different requirements for receiving pre-approval. As such, it is essential to understand what each lender needs before making an application. As things stand you seek conditional approval when you are aware of your borrowing capacity. Moreover, you need to be aware of the various home loan products out there. The majority of mortgage lenders will require you to supply information on a specific property prior to receiving pre-approval.
What if I am denied conditional approval?
One of the biggest reasons why most people are denied conditional approval is if a lender is unable to verify the information you provide them. With this in mind, ensure that the information you provide mortgage lenders satisfies their standards for pre-approval. Being denied conditional approval is a huge wake up call that should help you reassess your expectations. Only proceed to apply for another pre-approval when you are certain you can service the loan type you are seeking. Give yourself time to save more money and make any necessary financial changes.