The benefits of being pre-approved

By the resi financial blog team, 29 January 2015

The benefits of being pre-approved

Too often, house hunters find their dream property but then have those dreams crushed when lender after lender refuses to lend them what they need. Being pre-approved for a home loan means you can look in the price range you know you can afford.

There are other benefits as well. It’s a process that is free and the amount is generally valid for up to three months – although some lenders guarantee it for longer. It also shows agents that you are a serious buyer – there are some that don’t bother showing properties unless it’s to people who can guarantee their financing. Being pre-approved also speeds up the settlement process. 

One of the first things to do to get your pre-approval process on its way is to check one of the online mortgage calculators. These give you a quick idea of how much you are likely to be able to borrow. Then when you’ve narrowed down a few likely lenders, arrange to meet them.

Some of the information you’ll require when applying for pre-approval includes proof of your income and proof you have a deposit. You’ll also have to provide information around your monthly expenses, such as other loans and credit cards.

Once you have proven that you meet the lender’s criteria then you’ll be granted conditional pre-approval so you can start house hunting with confidence. After you find a property you want, you then need formal (unconditional) approval from your lender.

Some potential borrowers may find they are turned down for a loan. There are several reasons why this may happen. Some of the common ones are that your credit rating is too low; you can’t provide documentary evidence of your income; you have too many loan enquiries on your credit file – too many tend to make lenders suspicious; or you have recently changed jobs.

It’s good to know the reasons why you may be rejected so you can ensure you meet all the criteria before you apply. 

And remember with conditional pre-approval the lender is under no obligation to lend you the funds. Once you have found your property your lender will then verify your financial status to grant you unconditional approval and a final offer.

Categories: home buyers, home loan pre-approval, home loans, mortgages, pre-approval, property purchasing