Should I obtain a financing commitment for the purchase of my own home before starting my property search?

Why a home financing commitment is your most important tool

Many prospective buyers make the mistake of approaching the process chronologically incorrectly: first finding the house, then securing the financing. In today's market, this is risky. An early financing commitment for your home reverses this logic and gives you crucial advantages on several levels.

Reality check for the budget

Before you spend hours browsing real estate portals, you need to know your true budget. Many laypeople misjudge their affordability by using current low interest rates. However, banks calculate more conservatively (using a hypothetical interest rate of 5%).

A financing commitment for your own home forces you to put on your "bank glasses".

• You will find out in black and white whether the bank will actually give you the 1.5 million francs or whether it stops at 1.2 million.
• With a mortgage commitment in hand, you can focus your search only on properties that are realistically within your budget. This saves time and protects you from the emotional disappointment of falling in love with a house that's unattainable. The mortgage commitment thus acts as your personal financial compass.

The competitive advantage for real estate agents

Put yourself in the seller's shoes. He has two offers on the table. Both offer the same price.

• Interested party A says: "I still need to talk to my bank, that will take about two weeks."
• Prospective buyer B submits a current financing commitment for home ownership .

The seller will almost always choose prospective buyer B. Why? Because a mortgage commitment offers security. It proves that the buyer's creditworthiness has already been checked. In competitive markets like Zurich or Geneva, real estate agents often require a mortgage commitment before they even schedule viewings or accept a purchase offer. Anyone who cannot present a mortgage commitment will not even be allowed to participate in the bidding process.

Speed is key.

When the perfect property comes along, things need to move quickly. If you already have a general financing commitment for your home , your personal data (pay slip, tax return, proof of equity) is already on file with the bank and has been verified.

• The process is changing from a complete refinancing to a pure property inspection.
• Instead of weeks, the final loan approval often only takes days.

This speed, made possible by the existing home financing commitment , is often the deciding factor. You can make a binding commitment faster than the competition without a home financing commitment .

Costs and liabilities

A common misconception is that a financing commitment for a home is expensive or ties you to the bank.

• Free of charge: Banks and mortgage brokers usually issue a preliminary mortgage commitment for homeownership free of charge. They see it as a customer acquisition tool.
• Non-binding: A mortgage commitment for a home does not obligate you to later take out the mortgage with that bank . You can theoretically still compare offers. However, if you need a quick solution, most people will go with the bank that issued the mortgage commitment , as they already have the necessary information.

Therefore, there is hardly any rational reason to forgo obtaining a financing commitment for home ownership .

The difference: certificate vs. loan agreement

It is important to separate the terminology.

• The general financing commitment for homeownership: This confirms a maximum purchase price (e.g., "We will finance Mr. Muster up to a purchase price of CHF 1 million"). It is based on your income and assets, but is independent of the specific property.
• The property-specific financing commitment for homeownership: Once you have found a specific house, the bank will assess its value. Only when the property meets the valuation guidelines will the general financing commitment for homeownership become an irrevocable financing confirmation for the purchase agreement.

The general financing commitment for homeownership is therefore the first step, the property-specific commitment the second. Without the first step, the second will be significantly delayed.

Psychological safety for you

Buying a house is stressful enough. The uncertainty of whether you'll even get the money adds to the burden.

A mortgage commitment for your home gives you peace of mind and confidence. You approach negotiations differently when you know you have the money. You negotiate not as a supplicant, but as a financially sound partner. This psychological strength, supported by the mortgage commitment , can help you act more confidently in price discussions.

Conclusion

The question "Should I get a mortgage commitment before looking for a property?" can be answered with a resounding "Yes!" In a competitive market, a mortgage commitment for homeownership is n't a nice extra, but an absolute necessity. It defines your budget, opens doors with real estate agents, and speeds up the process at the crucial moment.

Consider securing your home financing as part of your homework. Those who are well-prepared have the best chances. So, first go to the bank or a mortgage advisor, clarify your options, and obtain the necessary document. Only then can you begin the hunt for your dream home – armed with the security of a home financing commitment .

If you want to quickly and easily find out how much house you can afford and need an initial assessment for your home financing commitment , Loft offers digital tools and expert access to get you ready for the market.

Glossary

• Home financing commitment: A document from a bank confirming its willingness to grant a mortgage up to a certain amount. It serves as proof of creditworthiness when searching for a loan.
• Calculated interest rate: The fictitious interest rate (usually 5%) that the bank uses to issue a financing commitment for a home . It ensures that the affordability will be maintained in the future.
• Property review: The second step after the general financing commitment for home ownership , in which the bank assesses the value of the specific property (lower of cost or market principle).
• Proof of creditworthiness: A document demonstrating creditworthiness. In the real estate sector, a financing commitment for a home is the most common proof of creditworthiness for buyers.
• Affordability: The ratio of income to the calculated costs of the property. A positive affordability assessment is a prerequisite for any home financing commitment .