Buying an apartment with FHDS and low preapproval amount

Hi all,

I'm a new buyer interested to get into the Syd market so back in July I signed up for the FHDS with one of the major lenders (there's only 2 for FHDS but I won't name them here).

So things go well enough and I secure a spot for the FHDS and obtain a preapproval. Only problem is that this preapproval was analysed in August, and valid for 90 days, and this lender won't let me extend the scheme spot for another 90 days after November to do a new preapproval (which they can due to Covid). The problem I have with this August preapproval is that for a 5% genuine savings deposit, my preapproval is low as it took my bank balance at the time and they added an additional clause to cancel all my credit cards, and its 50k lower than my maximum borrowing capacity they showed me earlier at the bank branch. It seems my bank manager won't allow me to increase my borrowing capacity at the time at settlement eg. in November when my bank balance would show more genuine savings, so proportionally I should be able to borrow more.

At the moment, I am looking at new units in Sydney. I found one at a good price, let's say for example its 550000. I offered 530000, as my preapproval is only for 526000 and my bank manager does not want to entertain increasing my loan amount at the time of settlement. Basically I would need an extra $20000 to cover the price on top of my 5% genuine deposit, and this is also before bank valuation.

However the vendor doesn't want to budge from the price of 550000 for now, and I also think my bank doesn't want to budge from the finance approval of 526000. I asked if the unit would remain on the market for another 2 weeks, but the real estate agent couldn't guarantee this because they feel confident to sell at 550000 to anyone else.

What do you think I should do in this situation.... I could borrow $20000 from other people but I really do not want to do this, but I feel the apartment is really worth for the price.

Should I email back my bank manager saying that I can obtain a guarantor loan at X bank to cover this instead if she does not want to change my preapproval amount, or should I wait it out or offer 540000 and see if the vendor approves it?

I don't think I can borrow a personal loan to cover the price difference and I think it's not a good financial idea too.

 

Why do you think this and what are you basing this on? Comparable sales? Bank valuation? You honestly cannot find another similar property? Really can't imagine there is lack of supply for units at that price range.

What do you do it the val comes in low?

 

if your Pre approval is $526k, you should set aside about $50k from that to allow for other cost like Stamp duty, Conveyancer, etc. Dont max it out with the Purchase price. This is where disaster happens like a shortfall for instance where you cant settle ie. Valuation drop before settlement etc. I wouldnt wanna be in a position where I will over leverage myself.

 

I believe with the FHDS there would be 0 stamp duty.

A buffer is definitely advised though.

 

With the FHLDS the requirement is 5% genuine savings and about $4,000 to cover conveyancing and other purchase costs. I'd generally suggest people have a little extra cash so they can pay the bills after settlement as well.

@Moooo $526,000 may be the most the bank you've chosen can lend based on your financial circumstances. They may not be able to increase this.

Perhaps get a second opinion from one of the brokers on this forum?

 

Comparable sales around the suburb... I was researching in the area (recently sold on Domain and Realestate). I can find a similar property but in an entirely different suburb 10kms away but thats not the same area I am looking at. I also have a CoreLogic report for that address and it listed prices around the area as well, this unit is below the estimate range & it said high confidence

I asked my bank and they said they would only do valuation once I pay holding deposit, and the holding deposit will only come after the vendor agrees on a offer though.

 

Sure thing, yes I agree I feel I am stretching my budget. I can buy a one bedroom comfortably but this property I am looking at is two bedroom. I did weigh up restarting a January 2021 FHDS application in the future to see if my preapproval would become higher, not sure if property prices would continue dropping a bit

 

Not sure if I've seen this scenario before where if you've improved your servicing that can't be reworked.. for instance I had two FHLDS scenarios in this current lot where the actual purchase was above the initial budget/preapproval. I think you need to get to the root cause of why they can't to understand it....

Definitely wouldn't be using a personal loan to cover the gap, that'll most likely result in a decline.