Shopping for a new home before you shop for a home loan is like eating pudding before your main meal – and is equally likely to give you indigestion.
So says Shaun Rademeyer, CEO of BetterLife Home Loans who explains that our home “wish lists” usually exceed our budget capabilities, and that buyers often aim too high only to be disappointed when they find they can’t afford the property they have set their hearts on.
“It’s all too easy when you’ve seen something you really want – like a bigger garden, a chef’s kitchen or a really great home in your favourite area – to start rationalising about why you actually ‘need’ it or ‘deserve’ it (like that extra spoon of pudding) and making plans to get it”.
“However, such clouded judgement is very risky when it comes to property purchases, and the financial errors you could make are likely to last a lot longer than a few extra calories. Indeed, the home you thought you liked so much could end up becoming a heavy burden on your finances and your quality of life for the next five, 10 or 20 years.”
That is why, he says, astute buyers always sort out their financing first, before they go house hunting, and preferably also get home loan pre-qualification so that they have a very good idea of how much they can spend and are not tempted to look at properties which are out of their reach.
“The easiest way to do this is through a reputable bond originator which will assist you to get a bond pre-qualification certificate that will not only give you confidence when making an offer, but also make sellers more likely to accept your offer because they can see that have the means to go through with the transaction.”
Pre-qualification, Rademeyer says, will also demonstrate to estate agents that you are a serious buyer – “and this is very important in the current economic climate when agents often have to ‘sell’ the same property three or four times in order to find a buyer who can actually qualify for a bond”.
“They would obviously much rather show their listings to someone who has already put a lot of thought and preparation into the home buying process.”
When applying through BetterLife Home Loans, he notes, the process of pre-qualification is not very complicated and does not take long – but it can reveal some obstacles that prospective buyers need to remove before they can go ahead with a home purchase and a home loan application.
“These might include the need to clean up their credit record, for example, or the need to provide better proof of income, especially if they are self-employed – and that could take a few weeks. However, it is well worth doing whatever is necessary at this stage because it will not only enable them to be pre-qualified but also significantly improve the chances of their actual loan application being approved at a preferential interest rate”.