Buying a home is one of the biggest and most significant investments most people will ever make in their lifetime. The norm is usually getting a pre-approval from the bank before you start house hunting. However, it is possible to purchase a home without a pre-approval from the bank. In the blog post, we will take a look at how you can buy a house, even if you don’t have a pre-approval.
Save for a substantial deposit
The first thing you need to do is to save up for a significant deposit. When you have a large deposit, it shows lenders that you have some skin in the game and that you are committed to paying back the mortgage. If you have a large deposit, lenders are typically more willing to lend to you, even without a pre-approval. A good rule of thumb is to aim for a deposit of at least 20 % of the property’s value.
Consider alternative lenders
If you are unable to secure a pre-approval from the bank, consider looking at alternative lenders, such as non-bank lenders. They may be more willing to lend to you without a pre-approval as they often have less strict criteria. However, keep in mind that the interest rates may be higher with alternative lenders, so it’s important to compare different options.
Get a mortgage broker
Mortgage brokers are experts in the home loan industry, and they can help you find a lender who is willing to lend to you without a pre-approval. They have access to a wider range of lenders and can help you find the best deal for your circumstances. They can also help you with the application process and can provide guidance on what documentation you will need to submit to the lender.
Look for properties below your budget
If you are not able to secure a pre-approval, consider looking for properties that are below your budget. This way, you can increase your chances of being approved for a mortgage. When you find a property that is below your budget, you may also be able to negotiate a lower purchase price, which will help you save money in the long run.
Improve your credit score
Your credit score is one of the most important factors that lenders consider when deciding whether to lend to you. If you have a poor credit score, it will be challenging to secure a pre-approval from a bank. However, there are ways to improve your credit score, such as paying your bills on time, reducing your credit card balances, and disputing any errors on your credit report.
Get a guarantor
If you are not able to secure a pre-approval due to your financial circumstances, you may be able to get a guarantor. A guarantor is someone who agrees to pay back the mortgage if you are unable to. This can be a parent or a close relative who has a strong financial position. However, it’s essential to note that if you are unable to pay back the mortgage, the guarantor will be responsible for the debt.
In conclusion, buying a home without a pre-approval from the bank is possible. By saving for a significant deposit, considering alternative lenders, getting a mortgage broker, looking for properties below your budget, improving your credit score, and getting a guarantor, you can increase your chances of being approved for a mortgage. However, it’s important to keep in mind that buying a home without a pre-approval can be risky, and it’s essential to do your research and seek professional advice before making any decisions.
Everything shared in this blog post is general financial advice. For financial advice tailored to you, please book a kōrero with us.