Home Loan Pre-Approvals
Buying a home is one of the biggest things you’ll do in your life. A pre-approval should be obtained before making an offer on a property, as it is the best indicator that your financial situation will be acceptable to the chosen lender. With a pre-approval you can act more quickly, as your home loan approval is only subject to you finding a suitable property. It will also give you the confidence to go house hunting, make an offer or participate in the auction process.
Pre-approvals can be called different things by different lenders: conditional approval, indicative approval or approval in principle. It all amounts to the same thing! Obtaining a pre-approval is a preliminary step in the application process. It's an indication from a lender that they will lend you a specific amount, subject to meeting certain conditions. It’s not a guarantee that your application will be approved – it is simply an indication that the application fits within lender's credit policy.
If you would like to get a better idea of your borrowing power and what your likely repayments might be, try our Borrowing Power Calculator and Loan Repayment Calculator.
Benefits of a home loan pre-approval
There is no obligation to utilise the finance, if you don’t want to use the home loan pre-approval you don’t have to.
A home loan pre-approval lasts for 90 to 180 days depending on the lender, with some having an option to roll over if the pre-approval expires.
Speeds up the formal loan approval process – once you have signed a contract, generally, all that the lender needs to approve the loan is a satisfactory valuation on the property.
Vendors love to hear you have a home loan pre-approval as they know you are a serious buyer, this can boost your negotiating power.
A home loan pre-approval will give you confidence in your borrowing capacity and the price range in which you can afford to buy within.
Purchasing via Private Treaty
A purchase by private treaty or private sale, takes place when a property is listed for sale through a real estate agent with an asking price. Prospective buyers make offers via the real estate agent, who then presents them to the seller for consideration. Once you have found your dream home and you’ve reached an agreement with the seller, your Mortgage Broker will then assist you to obtain an unconditional home loan approval from the lender.
Your Mortgage Broker will then send a copy of the Contract for Sale to the lender and arrange for the lender to conduct a valuation of the property. This process can take up to 5 days, depending on a few factors including the availability of the valuer and how quickly the seller or real estate agent can provide access to the property.
Once the unconditional home loan approval has been received, you’re now ready to sign and exchange contracts. When exchanging contracts with the vendor, you will also be required to pay a 10% deposit. This process is handled by your appointed legal representative — a certified conveyancer or solicitor.
Purchasing via Auction
A property sale via a public auction is a competition in the open market. Prospective buyers need to carry out all due diligence and checks prior to the auction date. The seller will set an undisclosed minimum sale price, this is called the reserve. The highest bidder at the end of the auction becomes the successful buyer, provided this bid matches or exceeds the seller’s minimum reserve price. Contracts are exchanged that day and no cooling off period applies.
Should the seller’s minimum price not be achieved on the auction day, the highest bidder would be granted the opportunity to negotiate further and may end up agreeing to a sale privately. When you have a home loan pre-approval in place, it is less likely that problems will arise throughout the auction purchasing process. With a home loan pre-approval, you will be able to bid with confidence at an auction knowing you have finance for the purchase sorted.
Why choose My Finance Consultants?
We do all of the legwork
We compare hundreds of home loan options from a wide choice of lenders, including the big banks and specialist lenders. We handle every step, having a thorough process in place to qualify you with our lender panel to find the most suitable lending options for you. We organise all of the required paperwork, order lender valuations, liaise with your real estate agent and conveyancer for a smooth transition to settlement.
We provide a convenient service
Mortgage Brokers save you the time and hassle involved in applying for a home loan - from application through to settlement. We'll meet at a time and place that best suits you, to establish your needs and preferences. We then do all the research and running around to manage every step of the application process. This saves you shopping around - as we do it all on your behalf.
We provide professional advice
We are fully trained, and accredited with every lender we represent. We are full members of the Mortgage & Finance Association of Australia and we have many years of industry experience. We also have a number of consumer protection initiatives in place to protect you - our valued clients. As mortgage professionals, we seek to guide you through the lending process to help you make better financial decisions.
We help you select the right home loan
Our first priority is helping you select the home loan that’s right for you, now and into the future. Your Mortgage Broker will save you the time and hassle associated with shopping around for a home loan, they will also guide you through the home lending process to help you make better choices with your personal finances.
We will always try to save you money
We use comprehensive software which helps us pinpoint the most suitable and competitive home loan for you. Typically, our service can help cut the current interest rate you are paying as well as reduce your fees and monthly repayments. Using a Mortgage Broker is also a great way to figure out a strategy to maximise your borrowing power.
We don’t charge you a fee for our service
There is no charge to you for our services because the lender pays us a commission once your loan has settled. We do charge a commitment fee for home loan pre-approval applications, however we will refund this to you upon settlement of your home loan. We will always aim to provide a trusted, friendly and professional mortgage broking service.
Our clients have been saying some great things about us!
Whatever your goals, a competitive home loan will get you there faster!
Whether you're a first home buyer, upgrading to your next home, getting into property investment, or wanting to refinance and pay off your existing home loan sooner, we can help you make the right decisions and stay on top - whatever your home loan needs.
We'll compare more than 40 leading banks and lenders, as well as hundreds of home loan options to find one that's right for you. No matter what kind of mortgage you're interested in, you'll enjoy expert home buying and lending advice from a Mortgage Broker you can trust.
Our industry knowledge and sophisticated mortgage software allows us to assess and compare the hundreds of home loans that are available in the marketplace, we will calculate your borrowing capacity and identify which lenders you will qualify with.
If you're ready to start your home loan journey, give our friendly team a call on 1300 381 955 or visit the Book Appointment section on our website.
FAQs
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A pre-approval may seem like jumping the gun and running things out of order, however it does have some serious benefits. A pre-approval indicates to sellers that you're serious about buying. With the lender paperwork complete, you have a clear budget of what you can afford to pay for your property and you won’t run the risk of over committing.
If you have a pre-approval from a home loan lender, you have already started the process towards getting a home loan. You will be in a good position to move on a property quickly, proceed to unconditional approval and exchange contracts before others in the market. Real estate agents may also ask for a copy of your pre-approval prior to accepting your offer to ensure that you are a serious contender.
Speak to your trusted Mortgage Broker about getting a home loan pre-approval in place, before you head to an auction or make an offer on a property.
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For most lenders, pre-approvals are valid for 90 to 180 days. This is because both a borrower's financial situation and the property market can often change over a few months. When applying for a pre-approval, speak with your trusted Mortgage Broker about the expiry date and what will happen if you don't find a property within that timeframe.
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It is recommended that you get a home loan pre-approval for your maximum borrowing capacity. This is because you can always borrow less. If you end up requiring more than the initial pre-approval, the credit assessment process will need to start again.
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Yes. There are two different types of home loan pre-approvals. For both types, you will need to provide personal details and information on income, expenses, assets, liabilities and how often you have moved home or changed employment in the recent past. The main difference between the two types is what the lender does with the information that has been provided.
Full assessment
This is where the lender's credit department does a full assessment, including reviewing your documents and conducting a credit check. This type of pre-approval will take a few days to be issued and results in the lender running a credit check, which leaves an enquiry on your credit file. Multiple enquiries can negatively impact your credit score. As such, this type of pre-approval is less common.
Online assessment
An online assessment can often be received quite quickly, either on the spot or within a few hours. However, the finer details of your credit report and documents have not been evaluated by a credit assessor. This type of pre-approval will have more conditions attached based on the details included in your initial application.
While the full assessment style of pre-approval results in a credit check against your file, the more common online assessment gives you an idea of how much you can borrow without the lender doing a credit check. This is a great way to get an initial indication of the loan amount you may be eligible for.
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A pre-approval does not include an assessment of whether the property is acceptable to the lender. This is why one of the conditions in the pre-approval will be 'subject to a satisfactory security valuation'.
Certain types of properties may not be acceptable to some lenders, such as:
Small apartments or particular apartment blocks
Hobby farms
Certain suburbs
A property with large power lines close to it
A property that is not habitable or needs significant repair
If the property is unacceptable to the lender, then you will need to discuss this further with your trusted Mortgage Broker to identify a possible solution. All lenders have different risk appetites, it is not uncommon for lenders to assess the same property differently.
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Yes. A change in your circumstances can affect your home loan application. If your personal or financial situation changes after you have been pre-approved, the lender will need to reassess your application. In a worst case scenario, the lender may consider that you’re no longer able to afford the loan repayments.
Some examples include the following:
Changing jobs
Becoming self-employed
Going part-time or becoming a contractor
Taking on a new credit card or loan facility
Having children
Spending your deposit on an emergency expense
Lenders finding out about undisclosed loans or credit cards
Lenders will always do a full assessment after you've found the property you want to purchase before approving your home loan. A change in your circumstances doesn't necessarily mean your home loan application will be rejected.
Further, there is a possibility that interest rates and the lenders own credit policies could change. If interest rates increase, the maximum amount you are able to borrow may decrease. If the lenders credit policy has changed, then you will need to discuss this further with your trusted Mortgage Broker to identify if this affects your situation or whether an alternative solution is required.