Benefits of home loan pre-approval
Updated: Jul 31, 2020
If you're considering buying your first home or an investment property, we recommend that you get pre-approval first. Pre-approval confirms you're eligible to apply for a home loan up to a certain amount, so it protects you from overspending when you're searching for your property.
There are huge benefits to attaining pre-approval, and we delve into a few of them below:
1. Confirm borrowing amount
Pre-approval takes the uncertainty out of property hunting, and allows you to know exactly how much you can afford to pay for your new property and the repayments you'll be making after meeting your living expenses.
2. Save time on your property search
Searching for the perfect property can be tiresome so with pre-approval you won't be wasting time looking at properties you can't afford.
3. Gain a competitive advantage
As soon as you find that house of your dreams, you want to be able to jump on it before someone else snaps it up - and by having your pre-approval in place it gives you the confidence to make a strong offer on the spot. For those bidding at an auction, a pre-approval helps you negotiate from a position of strength.
4. It protects your deposit
Before you hand over your deposit money, it pays to make sure you can get the home loan you need to complete the purchase. If there is an issue with your eligibility or a lender won’t approve the amount you need, you could potentially lose your deposit.
Pre-approval gives you an important financial safeguard. If you’re buying at an auction, it's particularly important because your deposit is non-refundable. Once the hammer goes down and you’ve made the highest bid, you’ll be locked into the purchase.
Now that you know the benefits, here are 3 steps to help you get started:
1. Collect your documents
Proof of identity
Proof of income and savings
Proof of living expenses and other expenditure
Evidence of current assets and liabilities
2. Contact your mortgage broker to find out
How much can you borrow
How much you require for a deposit
How much you can repay each month
If you qualify for a government grant or concession
3. Submit pre-approval application with a lender
We fill out the forms and do all the work
The lender provides confirmation in writing
Pre-approval lasts for 3-6 months
How long does pre-approval take?
Turn-around times vary for each lender from the time of application submission. Verify with your broker the expected timeframe for your preferred lender. Providing us with the correct documentation up-front will help achieve a speedy turnaround.
The property must also be evaluated before your loan is approved
Once you find the perfect property, you'll still need to make a formal loan application to the lender and as part of this process the property will need to be evaluated to ensure it meets the lenders criteria. Lenders may deem it unacceptable due to being remotely located, its value is not enough to back the amount of the loan, or the location is 'risky', among other concerns.