Buying Prior to Finance Approval

Apologies in advance if this thread has been done before...

We're looking to make an offer on an apartment before finance has been fully approved. Our deposit loan has been approved by our bank, but we still waiting on the additional 80% sourced through another lender.

Has anyone gone down the same track? Also, can we negotiate a 5% deposit or is this unlikely to be accepted by vendors?

We like this property and don't want to see it slip by, but are happy to be patient if that is the safe and advisable thing to do!

I have a feeling this is too risky...what are you thoughts?

 

Sign a contract subject to finance. Too dangerous to go upconditional

 

You have two options.

1. Make an offer that's subject to finance. That should allow you some time to arrange the extra 80% and settle the 20% equity release.

2. Go unconditional on the purchase (like at an auction). Speak with your broker/banker about the likelihood of getting your loan approved first. If they're not confident and feel that the application is marginal than it's important to have a subject to finance clause.

Negotiating a 5% deposit is common.

Good luck!

Jamie

 

Not every purchase needs (or has) a pre-approval. The equity release for your deposit being approved tells me that there's no issues with your credit history. For the remaining funds on the next purchase, a broker should be able to give you an indication of how comfortable they are with your proposed price point.

If you're going to pay $500k for a property and your income supports $550k then it's a bit tight and a pre-approval or finance clause is only prudent.

On the other hand if your income supports a price point of $1M and you only need $500k, then you really don't have anything to worry about. A good broker will be able to determine the level of comfort in this, but make sure they've reviewed the actual documentation that the banks will require.

Technically the right advice is to always have a pre-approval and a finance clause, but that's not always feasible. In fact some lenders aren't even giving out real pre-approvals these days. Instead they simply make an automated assessment on the data submitted without reviewing the application or the documentation. The pre-approval isn't worth the paper it's written on.

 

Maybe, maybe not pending your individual curcumstances.

As mentioned get your broker to run the numbers using the exact same documentation the assesor will use so no surprises.

If you dont have a broker then get a regular from here to guide you in the right direction as you dont want to get it wrong and loose your deposit and possibly be up for other costs as well.