Getting ready to buy your own property? Getting a pre-loan approval (IPA) should be your first priority.
Singapore has one of the highest home ownership rates in the world but only less than 5% of people say that they’re familiar with the home loan process, so at times applying for an IPA can be seen as the least of the home buyers’ priorities.
In this article, we’ll be explaining why a formal pre-loan approval (IPA) is the most important step when considering buying any property.
But first, what is an IPA?
Because of homeowners’ unfamiliarity with home loans, they often confuse loan pre-approvals with home pre-qualifications, which is understandable. Although the two are similar, mixing them up might cost you thousands of dollars or even six figures! So before we go into the reasons why you should get a formal pre-loan approval IPA, here’s what you need to know:
An In-Principle Approval (IPA), also known as an Approval-in-Principle (AIP), is essentially a promise from a lender that if you choose, they will extend you a home loan up to a certain amount and term. Applying for an IPA will definitely help you budget and prepare for upcoming real estate expenses – we all know we need all the help we can get when it comes to buying a property! To help you visualize, if you have a $600,000 IPA, you can probably afford to buy a property for up to $800,000. (based on a loan-to-value limit of 75% for your first home loan).
Now that you know the basics of what a formal pre-loan approval IPA is, let’s get to the juicy parts...
1. Stay competitive in a fast-paced market
Good listings can come and go within a matter of days.
We want to be positioned to bid and close as early as possible to prevent more interested buyers from competing in a good listing.
Unless our strategy is to extract value from a stale or hard to sell listing, then an IPA won't matter as much.
2. Get an advantage when negotiating
There are cases where sellers accept a lower competing offer from a buyer because they have an IPA over buyers who have higher offers but don't have an IPA. Having an IPA means you’re more credible and you’re really a serious buyer.
Experienced sell agents pre-qualify buyer and buyer agents if their clients have done their IPA. I'll take any advantage we can get, thank you.
3. Clarity of budget
What happens when you stumble upon your dream property and want to take immediate action?
We get it. There are homes where when we see it we think to ourselves, “this is it… ” and you can already see where you and your partner or family are going to make more memories. When we come to that point, we’ll do everything to get our dream home.
Without an IPA, you'll overwhelm yourself with questions later like:
a.) Should I book the unit by paying the option fee now?
b.) Can my loan get approved within a short period?
c.) Which banks offer the best rate?
d.) Can I afford this beautiful deal that is at the top end of my budget?
We highly suggest preparing early so you won't get unnecessary scares.
4. Long approval times especially during peak buying season
Even after submitting relevant documents, the process of getting a formal approval can sometimes take up to 2 weeks! (your option period is only 2 weeks).
Especially during peak periods (like in 2022) and in-between public holidays.
Imagine the stress you and your agent will go through.
5. Builds communication and trust with your agent
Investing the time to complete this essential step gives your realtor more confidence that it's worth committing time and effort to finding your ideal home together.
Also, it gives them the confidence and an advantage to negotiate with when it’s time to push in an offer for you.
A good and trustworthy agent and banker will always use such information to protect you as well.
Lastly…
6. It's 100% free
Enough said. Get it done today.
Need help in securing an IPA so you can finally check off that first essential step towards buying your dream home? Feel free to ask our expert advice by clicking the chat button on the bottom-right corner.