Well, we have reached the very tip of our goal and I have found a house. It is up for auction soon and I am trying to get everything organised with the bank in time for the auction.
Let me say that I am unbelievably stressed and am beginning to think we should just rent forever.
It seems with the financial crisis, the banks are not only tightening up their lending criteria (as they should) but they are also taking an insane amount of time to even look at applications. It has been almost three weeks since we put in the application for pre-approval and they still haven't looked at it. Why? Because they give precedence to people that have actually got a house to buy.
But we are going to auction I tell James (no last name of course) from the bank. There will be no backing out if we win the auction so we need pre-approval before auction day. His solution was to sign the contract subject to finance approval. But it's an auction I tell him. There is no backing out or conditions when buying at an auction. His reply - oh, well don't buy at an auction.
Aaagh. Does this man even live in Sydney. 95% of properties in our area go to auction (not sure why that is either). The sellers for the house we are looking at won't even consider selling before auction unless we waive the cooling off period which puts us in the same situation.
On top of all that any pre-approval will be subject to a bank valuation of the property which I was told is usually about 20% less than market value. And the banks will only lend up to that amount.
Now this bit stumps me. Firstly, market value seems to be very subjective so I assume bank value will be the same. We have our limit on this particular house and we think it is a fair value, but what if the bank disagrees? Secondly, if they value the property so much lower than the market value, why will they consider lending us 90% of the purchase price, which is of course more than the so called bank value of 80% of the market price?
So, we have 3 options:
- Not even consider signing a contract until our pre-approval is water tight.
- Go ahead on a very shaking and somewhat vague conditional pre-approval.
- Decide we are invincible and sign a contract without any pre-approval (possibly also using our own blood for the signatures).
So, you can see where the stress comes from.
On top of all of this, it is possible that everything will fall into place the day before the auction anyway and this worry is all for nothing and what I should be worrying about is whether someone will out bid us. In this case I will also have the added worry that I have been worrying about the wrong thing.
As I said, I think we should rent forever.