The home loan pre approval process, also known as conditional approval or approval in principle, is when your bank conditionally approves or denies you for a loan before you apply to buy a house.
The bank or other lender checks your finances and assesses whether you’ll be able to successfully repay a loan. If they deem you eligible, you’ll be granted pre-approval to borrow up to a certain amount. Most banks offer pre-approval which lasts for 3 to 6 months, giving you plenty of time to sort out the right home loan.
Pre-approval is essentially a guarantee to be approved for a loan if you apply for it, which can be a very useful thing to have while you hunt down the perfect home. After all, it’s incredibly exciting to buy your own home or investment property, but it’s a lengthy and often complex process, and pre-approval on your loan will make the whole process go a lot smoother and quicker.
So what happens in the home loan pre-approval process? How do you get it? And at the end of the day, is pre-approval actually worth getting?
The first step in the home loan pre-approval process is doing some initial research into your own finances. Consider your income, your typical expenses, what assets you own and how much you owe, and from there you can get a rough idea of how much you can afford to borrow:
You should also consider how much you might be able to afford in monthly repayments, as this will affect how much you are able to borrow:
Having got an idea of the sort of loan you’re after, it’s then a simple matter of applying to your bank for pre-approval (not making the loan application). Most banks let you apply online, over the phone, or in person at a branch. Your application will initially require some basic personal information in order to verify your identity – such as your name, address, and age.
Once you’ve sat down with your lender, they will assess several things:
Having analysed your finances, your lender will then decide whether or not you’re eligible for the loan that you’d like to take out. If they think you’re capable of repaying the loan, then they will likely grant you pre-approval!
Most lenders offer pre-approval but not all of them. If you want to obtain a pre-approvaland we can help you find the best lender to get you pre-approved
Home loan pre-approval is by no means compulsory. If you’ve found your dream home and the right loan product for your needs, you can go right ahead and apply directly to your bank without asking for pre-approval.
That said, pre-approval is a useful guarantee to have. It has several main benefits when house hunting.
First, pre-approval means you can go from open houses and inspections knowing exactly how much you can afford to spend. You know you’ll be able to get a mortgage on a house within a certain price range, so you won’t waste time looking at homes you can’t afford.
Secondly, pre-approval gives you the ability to make a serious offer on a home on the spot, as both you and the home’s owners can be sure you’re the real deal.
Finally, it takes away the headache of having to search out and reconsider a whole bunch of different loans every time you find a property you want to make an offer on. You may make an offer on several homes before being successful, after all.
The home loan pre-approval process takes some time and effort to get, but it’s definitely worth it for the freedom and peace of mind it provides. Most Australian property buyers will find pre-approval a very useful tool.
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