How Mortgage pre-approvals can accelerate home buying
In the current competitive real estate market, having a pre-approval in hand significantly strengthens a buyer’s position when closing a deal. It allows for quicker offers on homes, which is crucial in a fast-paced environment. Contrary to the belief that demand is driven solely by cash buyers, mortgages are seeing increased demand, supported by competitive lending rates, low down payment requirements, and a robust economy that has kept defaults low.
In May 2024, mortgages reached a 14-month high, indicating a surge in home financing demand, as reported by Property Monitor. However, timely mortgage acquisition remains a major challenge for many buyers, often causing them to miss out on their desired property.
The typical buyer’s journey involves weeks of house hunting across various locations. Once they decide on a home, they then seek home financing, a process that can take several weeks. Buyers who navigate this process independently must approach multiple banks for offers and compile all necessary documentation, only to find that the property they wanted has been sold to another buyer because their mortgage process took too long.
To avoid this, credible mortgage advisers recommend starting the pre-approval process alongside the home search. Pre-approval involves a detailed examination of a buyer’s financial situation by a lender, including income, credit score, debt, and assets. This results in a clear understanding of how much they can borrow and, consequently, how much they can afford to spend on a home.
Pre-approval offers several benefits for home buyers:
Visibility of Financial Standing
One primary benefit of mortgage pre-approval is the financial clarity it provides. Buyers can focus on properties within their budget, and pre-approval eliminates surprises by planning for additional fees such as closing costs, government fees, and home insurance.
Negotiation and Competitive Advantages
In a competitive real estate market like the UAE, pre-approval gives buyers an edge. Real estate brokers and sellers prefer pre-approved buyers because a valid pre-approval letter from a bank indicates that the buyer is committed and financially capable of completing the purchase. This puts pre-approved buyers in a stronger negotiating position and allows for more flexibility on pricing and terms.
Speeds Up the Process
Mortgage pre-approval can significantly accelerate the home-buying process. With technology streamlining mortgage processing, some banks now provide approval within 24 hours. This digital transformation reduces, if not eliminates, paperwork, and allows applicants to share their information digitally. Multiple mortgage applications can be made simultaneously across different banks, a significant improvement over the traditional method of applying separately to each bank.
With pre-approval, buyers can make quicker offers on homes, a crucial advantage in a competitive market. Pre-approved buyers can focus entirely on their home search without worrying about securing a loan from a bank. With much of the financial vetting already completed, the actual loan processing becomes faster and smoother.
