Shopping around for a property can be a daunting experience, particularly if you have any lingering questions around how much you can afford to spend. data market statistics property house weekly numbers count ipad search figure
However, you can overcome at least this one niggling concern by approaching the bank to obtain home loan pre-approval or pre-qualification.
It’s important to note that both of these result in different outcomes, in terms of having a good understanding of your home buying budget.
And critically, never assume that either the amount you are pre-qualified or pre-approved for is what you have to spend when it comes to the crunch.
If you are pre-approved to borrow up to $800,000 for instance, you logically cannot buy a house for $800,000.
Firstly, the banks’ standard Loan to Value Ratio (LVR) restrictions will apply, meaning you won’t be entitled to borrow 100% of the property value, but more likely 80 to 90% (with anything above this attracting Lender’s Mortgage Insurance).
Some people also forget that even if you’re pre-approved to borrow up to $800,000 and the property you finally settle on costs $650,000, you still will not be able to borrow the entire $650,000 because of these LVR parameters.
Additionally, there are purchase costs to take into account that will eat into your overall budget and that need to be accounted for on top of your loan.