If this is your first time buying, pre-approval might be a new concept to you. Here’s how it works.
The vast majority of buyers will (at some stage) approach a bank or lender for a home loan. As a buyer, you’ll be asked to provide certain information about your income, etc to prove you can comfortably repay your loan over time. Once your loan is approved, the deal on the house is done and money is exchanged.
In a nutshell, pre-approval means that you’ve spoken to a bank or lender and have provided all the required information, and you’ve been approved to borrow a set amount, if and when you find a property you’re ready to buy.
What are the advantages to securing pre-approval for a home loan?
Fear of missing out is never felt so acutely as the moment you lay eyes on the perfect property to suit your needs. Pre-approval lets you take action and lock it down on the spot.
Once you secure pre-approval, you may not find exactly what you’re after in a property for some time. No worries – you can easily renew your pre-approval and continue your search.
If you enter into negotiations with a seller, and they’re weighing up their options between two identical offers, knowing you’re pre-approved may tip the balance in your favour.
When you are ready to start searching, contact your local branch or apply online and a lender will contact you. Our lending experts will be able to let you know how much you can borrow, after assessing your income and commitments.
A “Conditional Loan Approval” (subject to valuation) will be issued, and this is a great real estate negotiating tool, as you have already checked your borrowing capacity. It’s worthwhile before you start searching for properties to organise a conveyancer/solicitor.
Start looking! Once a home is found, simply contact your lender who will confirm your income/commitment details and organise for a valuation to be undertaken on the property.
Once a favourable valuation is received, your loan is sent for approval. Once your loan is approved, the exchange can take place. Settlement is normally around 6 weeks (although can be sooner or later if both parties agree).
Everyone's circumstances will be different, but for simple applications, it can be as quick as 2 business days. Between 3-5 business days is fairly standard in terms of time-frame.
For more complex applications, it can take up to two weeks before you may recieve pre-approval. Check with your lender when having your initial conversation to get a guideline and avoid disappointment.
No, unfortunately getting pre-approval doesn't 100% guarantee you a home loan. There are factors that may come into play that may mean you get declined for a loan, even if you previously gained pre-approval.
For example, since getting pre-approval, there may have been a change in your circumstances that impacts your financial position and favouability as a loan candidate.
Home loan pre-approval in a nutshell is an initial assessment from a lender where they agree, in principle only, to lend you a certain amount of money to buy a property.
A mortgage pre-approval essentially serves two purposes: