Confused About Home Loan Pre-Approvals? Then Follow These 4 Steps
Ready to buy a property? You’ll need to show the seller you have enough money. For most people, this will mean getting a loan, and the first step to getting one is obtaining pre-approval for it.
Pre-approval – also known as conditional approval or approval in principle – is an indication from a lender as to how much you can borrow. If you have pre-approval, vendors and agents know you’re serious about buying. Here are the steps you need to follow.
1. Fill in a Fact Find and 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:
- Your identification
- Pay slips and potentially tax returns for your income.
- Your current property if you have one (a council rates notice will do)
- Loan statements for existing loans.
- Credit card statements showing your credit limit.
- The Fact Find will collect a wide range of personal information including date of birth, employment and address history. The lenders use this to determine if and how much they can lend to you.
We will use use all of this information to get an idea of how much you may be able to borrow.
2. Meet with your accredited broker
Make an appointment to speak with us about what you are looking to do. This also gives you the ability to ask as many questions, drawing on our expertise in finance and the property purchasing process.
We can help clients with:
- Assessing lenders and selecting the right fit - including all the main banks and many niche and value lenders.
- Comparing these lenders and producing a recommendation of at least 3 ideal lenders.
- Arranging CoreLogic professional valuation reports to guide you on offer prices and current market and suburb values. This is the same system real estate agents use for valuations.
- If you already hold property, we arrange bank valuations on those properties to determine value and your equity position.
- To minimise the risk of a declined application and wasting precious time, we carry out a pre-assessment to ensure you we target a lender and a loan amount that is realistic and that will stand the best chance of being approved.
- Arranging services such as accountancy, property conveyancing, depreciation reports, financial planning, and insurances - ensuring you making smart moves and covering the right bases.
At the appointment, we will use your information to calculate an approximate borrowing figure, and outline the steps that we will take to get a pre-approval in place for you.
3. Undergo a credit check and assessment
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.
The lender will also conduct:
- An underwriting assessment
- A valuation of the property (if you have identifed and contracted a property at this stage).
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 60-90 days. This is an indication, not a guarantee, of the amount you can borrow, and is subject to an conditions that have been specified by the lender.
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 us with details of the property, and we will work through the final steps with you.
Obtaining pre-approval for your loan is a vitally important part of the home-buying process. Contact us today for help with finding out how much you can borrow.