Chicken or the egg? Property or the finance?

It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.

Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.

But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.

First and foremost you need to determine if you’re eligible to borrow money from a lender. Apart from showing you have the ability to repay the loan, lenders will also assess a range of other hurdles for you to overcome like credit scoring. You don’t what to find out after you’ve made an offer that your credit history or deposit is not up to scratch.

Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.

Sellers are most interested in completing their sale fuss-free and with steadfast funding, and showing that you are capable of both will help put you at the top of a potentially competitive list of applicants. This is especially important in the off-the-plan market.

In the instance that you find and secure purchase of a home without having your loan pre-approved by a lender, there are a few pitfalls that you risk running into. Should you not be able to secure finance for the property, you may have to forfeit your initial 10 per cent non-refundable deposit.

Arranging your home loan at the last minute also leaves less time to find the most suitable loan and have it approved ahead of settlement. Any lender that has a special rate or product on offer will most likely have a longer turn around time than their competitors and as such you may not be able to obtain these products.

Unlike the Chicken Vs Egg debate, this one is simple. Finance pre-approval certainly comes before the Property.