Pre-approval for home loan

[Pugnosis]

Just after some advice. I have just been pre approved for a certain amount and will now start looking for property. If I had been approved for say $400 000 should I look for houses with a price range up to this amount plus my savings?

Eg. $400 000 pre approval loan
$45000 savings

Therefore should I look for a property up to $445 000 or is the pre approval taking into account my savings?

 

[TheBlackPrince]

Good question

Remember stamp duty when purchasing a house. If you buy a house for $400k, stamp duty, transfer and mortgage fees will add another $20k. This doesn't include conveyancing.

Always look for a purchase price to be max. 90% of your available funds. If you can jag one for under 80% you don;t pay Mortgage insurance. Don't over-commit yourself, just in case the RBA get cranky and lift rates quickly.

Good luck

 

[Pugnosis]

Thanks heaps for your advice. I now have a clearer picture!

 

[Coopers]

A couple of other things to note:

A bank will lend you as much as you can possibly pay back each month. That means if you borrow absolutely the limit you are approved to, then you will be putting a very large chunk of your income into interest payments. So much so, that you probably won't be capable of any extra.

Ideally, you will buy something a bit cheaper, I would target $300,000 with those figures above. You don't need a mansion first time around. Then, you can pay extra money off on the loan and build up some equity. You'll pay a hell of a lot less in interest in the long run, and own more of your own home.

So in essence - for god's sake, do some calculations, use some of the online "how long until my mortgage is paid off" websites to figure out what price you are comfortable buying at. Don't spend it all. Try to avoid that Mortgage insurance, it's a few k!

Also, you might be eligible for the first home owners grant, which can help with the $20k of fees already mentioned.

 

[Frodo]

If you can do it, buy $500K+

The market below this has been artificially pumped and in oversupply. IMHO first time buyer houses will drop in value as incentives are stopped. People who then upgrade will be larger in volume than the available supply of $500K+ houses available and that sector will boom.

All part of a cycle.

 

[saj_21]

Pre approval is a good move as it gives you a realsitic amount of what you can borrow on top of your deposit i.e. you hav $50 k saved up and pre approval for $300 k look towards $330 k. You will need this $20 K for stamp duty, conveyancing fees, building reports, insurances, services connections etc.

Pre approval will also speed up the process when you actually purhase a property as the lender and/or bank will have your details on record, no need to review your pay slips etc.

The market is pretty hot right now, i think prices in the next 3-6 months will flatten out and slow down a little bit but not to much. Agree with prevoious poster the sub 500K market is going up and up. However you can still buy good properties at good prices. Look for places for private sale as you will generally get a cheaper price than at auction becuase the emotion is removed from the purchase.