Whether you’re a first-home buyer or looking for another investment property, you’ve probably realised that getting a home loan is no walk in the park. With the different eligibility criteria and property prices are on the rise, it’s understandable if you’re anxious if the lender will approve your application.
However, there are some ways to make getting your dream home loan a little easier. One of these ways is getting a home loan pre-approval. Home loan pre-approval is a conditional approval for a maximum amount of money a lender would offer you should you apply for a home loan with them. As so, this makes deciding on and applying for a home loan much easier. Furthermore, it makes you aware of how much you can realistically borrow.
In this article, we’ll explore the following common questions about pre-approval:
- What is a loan pre-approval and how does it work?
- What are the benefits of a loan pre-approval?
- Are they any downsides to getting a loan pre-approval?
- Who can help me with pre-approval?
What is a loan pre-approval and how does it work?
A loan pre-approval is where a lender agrees that they would lend you a certain amount of money to purchase your home. It’s conditional approval. This means banks determine your financial situation and the condition of your potential property to pre-approve your application.
Pre-approval can put you at a huge advantage when applying for your home loan. This is because a lender can see that your application has already been partially assessed. It also shows a lender that you’re serious about buying. In turn, will ensure they take your interest in a property more seriously.
If you need a guide to estimate your monthly repayment, use our home loan repayment calculator!
What are the benefits of a loan pre-approval?
A home loan pre-approval smoothens the process of finding the right home loan and having your application approved easier. A pre-approval allows you to determine the maximum amount you can borrow. As a result, helping you to determine which loans you can realistically afford, making your final decision easier. This will help you bid, buy and apply confidently, knowing your application is extra secure.
On top of that, a pre-approval often speeds up the process of getting final approval on your loan. Lenders can see that your property and financial situation have already been assessed. You’ll also become a more attractive buyer to potential sellers. This is due to having a pre-approval that shows you’re serious about buying. Also, you can actually afford the property you’re interested in.
A home loan pre-approval can also give you a heads-up on the potential upfront home loan fees you need to pay.
Are there any downsides to getting a loan pre-approval?
Although pre-approval can increase your likelihood of getting a home loan, it’s only a conditional agreement. This implies that it does not guarantee that you’ll get the home loan you’re after. If the conditions of your property change or it receives a negative valuation, this may affect your likelihood of receiving final approval.
Any changes involving government regulations or your personal financial situation can also damage your pre-approval. It’s important to regularly monitor changes in the market and your personal financial situation to determine the best time to apply for pre-approval and final approval.
Having pre-approval can be very advantageous. On the flip side, seeking multiple pre-approvals in a short time period can actually harm your chances of final approval. Each pre-approval you receive appears on your credit file when enquiring about a loan. Hence, having many pre-approvals with many different lenders can create the impression that your financial situation is not stable.
It’s also important to note that you should only consider pre-approval if you’re actively looking to buy a property. If you’re not certain whether you’re ready to buy property yet or you’re still shopping around, it’s best to wait until you’re serious about buying a property to apply for pre-approval. Waiting until you’re ready to buy ensures your pre-approval is as accurate and effective as it can be, which could give you a great advantage when going to buy.
Who can help me with pre-approval?
Although pre-approvals give you an excellent advantage when looking for a home loan, they can be tricky to navigate. Knowing when the best time for pre-approval is, who to get it from and who can help you with your application can be tricky.
That’s where we come in.
Our experienced mortgage brokers are experts in all things home loans. We research and compare home loans from more than 30 lenders, giving you a wide range of choices when finding the best deal. We use our knowledge of and existing relationships with lenders to communicate with them on your behalf and negotiate better deals, saving you time and hassle.
For more information about home loan pre-approval and all things home loans, explore more of our articles or get in touch with one of our brokers via our website.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.