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Should You Get Pre-Approval for a Home Loan?


Are you ready to buy a property? For most people, this will mean getting a loan, and the first step to getting one is obtaining pre-approval for it.

What is pre-approval?

Pre-approval – also known as conditional approval or approval in principle – is an indication from a lender as to how much you can borrow. Whilst there is no obligation to take out the loan, obtaining pre-approval is an important part of the home-buying process as much of the hard-work in assessing your eligibility for a loan has already taken place making you even more ready on the day you find your new home.

What are the advantages of getting pre-approval?

There are a number of advantages to getting pre-approval, including the following:

  • Allows you to confidently begin the property-buying process by knowing just how much you can afford so you can start researching properties that are just right for you, and your family’s, personal and financial requirements.

  • Vendors and agents know you’re serious about buying a home and that you know just how much you can afford.

  • Much of the hard work in gathering your financial information for the lender to assess your application has already been done reducing your stress levels once you have found your home

  • You don’t have to sweat over whether your loan will be approved or not when you’ve made an offer on a home

  • Conditional approval is usually valid for 90 Days

What are the steps involved in getting Pre-Approval?

1. Gather Your Financial Information

To get an idea of how much you can borrow, and therefore what you can afford to buy, you need to give the lender a comprehensive picture of your finances. This includes your income and assets, and your financial obligations such as existing debts and living expenses (including ongoing bills, entertainment, food and car expenses, etc). You’ll need evidence of everything:

  • Pay slips and tax returns for your income.

  • Title deeds for tangible assets (i.e. physical items such as buildings, machinery and inventory), and portfolio statements for intangible assets (non-physical items such as copyrights and patents).

  • Loan statements for existing loans.

  • Credit card statements showing your credit limit.

If you already stick to a budget and have a regular savings history, you may want to provide bank statements to demonstrate this. You can use all of this information to get an idea of how much you may be able to borrow. We have a number of free mortgage tools and calculators that can help.

Click here for more information on the various information and documentation you will need to provide to support your loan application.

2. Meet with a Broker

Make an appointment to speak to a broker. The broker will provide a list of what you need to bring with you, such as the evidence explained above and the required forms of ID. At the appointment, the broker will use your information to calculate an approximate borrowing figure. If you want to proceed, you can fill in a pre-approval application form.

3. Undergo a Credit Check

The lender will arrange for an independent credit bureau to perform a credit check on you. This may affect whether or not you can borrow money, and how much.

4. Receive Conditional Approval

Assuming your credit rating allows you to borrow, you’ll then receive a conditional approval certificate from the lender. The certificate is usually valid for 90 days. This is an indication, not a guarantee, of the amount you can borrow. Use this figure to work out how much you can spend on a property, taking into account the size of your deposit. Factor in expenses such as conveyancing fees, stamp duty and so on. Also consider that you may not be able to borrow as much as the conditional approval certificate indicates.

Securing pre-approval will allow you to house-hunt with confidence.

What Happens Next

Once you’ve put in an offer on a house – whether at auction or a private sale – you’ll need to get full approval on a loan. Contact your mortgage broker with details of the property, and they’ll work through the home loan application process with you. Obtaining pre-approval for your loan is an important part of the home-buying process

Contact us today for more information on the home loan pre-approval process and for help with finding out how much you can borrow.

DISCLAIMER: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication. Please click here for disclaimer information and terms of use for this website and terms of use for this website and all our associated media as well as information regarding to links to 3rd Party / External websites that are not related to APLS Finance Solutions.

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