Buying a home is one of the most significant financial decisions a person will make in their lifetime. In Israel, where real estate prices are high and competition for quality properties is intense, it is essential to plan ahead and understand the mortgage process.
One of the key steps in this process is obtaining a pre-approval from a bank. This pre-approval serves as an initial commitment from the bank to grant a mortgage.
What Is a Mortgage Pre-Approval?
A mortgage pre-approval is a document issued by a lending institution that states the loan amount they are willing to grant the buyer, based on their financial profile.
In Hebrew, it’s known as an אישור עקרוני (ishur ekroni). A pre-approval will include a host of information, some of which may or may not be relevant at the time you receive it.
The most important part of a mortgage pre-approval is the amount that the bank will lend you.
Benefits of Getting Pre-Approved
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Understanding Your Budget
The pre-approval allows buyers to know how much they can borrow, helping them plan their home purchase budget accordingly. When you know your budget, you can shop with confidence. -
Time-Saving
In cases where quick action is needed (such as bidding on a property or competing in a hot market), a pre-approval allows buyers to act quickly and confidently. -
Early Identification of Issues
If the bank declines to issue a pre-approval, buyers can understand their limitations early and take corrective steps, rather than discovering problems later in the process when they may not have time to spare.
When Should You Get Pre-Approved?
Best Option: Before You Begin House Hunting
Get pre-approved as early as possible – even before you begin house hunting! This way, you can focus on properties within your price range and save time. Additionally, the property purchase process can move very fast in Israel. When fast action is required, having a pre-approval allows the buyer to proceed with confidence and speed.
Second Best Option: Before You Sign a Purchase Contract
In Israel, property purchase contracts are generally not contingent on financing. In other words, once you sign, you’re obligated to complete the purchase.
If you can’t complete the purchase, contract breach or cancellation generally incurs a 10% penalty. To avoid potentially hundreds of thousands of shekels in penalties, get pre-approved for a mortgage before signing a property purchase contract.
How Long Is A Pre-Approval Good For?
Formally, an Israeli mortgage pre-approval is good for 24 days. However, assuming that your personal situation stays the same or improves and that interest rates remain similar, the bank will honor the amount its willing to lend offer far beyond that.
What Would Make a Pre-Approval Invalid?
Most of the circumstances are related to the borrower. For example, if the borrower loses his job or suffers a meaningful decline in income, then the bank may no longer be willing to lend him the same sum.
If you are in the homebuying process and lose your job, contact your mortgage broker immediately to evaluate your options.
What else can change? The amount the bank is willing to lend is related, among other things, to the interest rate. If interest rates rise meaningfully, it’s possible you may no longer be able to borrow quite as much as before. (Conversely, if rates drop meaningfully, you may be able to borrow more.)
How Long Does It Take to Get a Pre-Approval?
Formally, banks are allowed 5 business days for straightforward applications and 7 business days for complicated ones. In practice, this may vary based on the volume of business a particular bank and branch is handling at the time, as well as how complicated your application is.
It’s always better to begin the process early. However, if you are short on time and need a quick answer, a mortgage broker may have contacts which can be leveraged to expedite the process.
How Do You Get Pre-Approved?
To obtain an Israeli mortgage pre-approval, you need to contact a bank and submit documentation such as pay stubs, bank statements, proof of additional income, and more. Many buyers choose to work with a mortgage broker at this stage, who can help present their financial profile clearly and identify which lenders are likely to provide favorable terms.
Wrap Up
Getting pre-approved for a mortgage is a critical step in the process of buying a home in Israel. It allows buyers to understand their financial capabilities, act with confidence, and strengthen their position in negotiations.
While it’s certainly possible to navigate this process independently, many buyers benefit from working with a mortgage broker – someone who understands the nuances of the banking system, can compare offers across lenders, and knows how to position your application for success. Especially in today’s complex and competitive market, having an experienced, unbiased professional on your side can help you avoid pitfalls and make better-informed decisions.
It’s advisable to begin the mortgage process as early as possible to ensure a smoother and more confident homebuying experience.
Have questions or want to understand your options? I’m happy to offer a free initial consultation to help you get started on the right foot.
