| Home Loan Pre-Approval Explained

If you can’t get the money – you can’t but the home.

Before you start looking for a home to buy, you need to know if you have a lender/bank who will lend you the money.  You need to get a “Pre-Approval”.

First Things First

FACT: Pre-Approval is not a guarantee that you will get the loan you need for the property you want.

A mortgage pre-approval is when your lender has agreed, in principle to lend you an amount of money towards the purchase of a home. This is pre-approval and is before you formally proceeded to a full or final approval.

If you’re approved, it’s for an amount, not a property and it’s not 100% guaranteed. The bank will still need to formally approve your loan for the specific property you want to purchase.

The Benefits of Pre-Approval

If you receive a pre-approval from a lender, it will be for (or up to) a specific amount. This will then allow you to your house hunting on the properties you can afford.

Pre-approval can also make your offer on a property more attractive to the seller. It show that you are a serious buyer and your offer is not likely to fall over due to lack of financing.

Pre-Approval Can Take Longer Than You Think.

You will need to submit basically full loan style documentation and have your finances carefully scrutinised. This often takes a reasonable amount of time.

So be cautious with your house hunting until you get a proper pre-approval in writing. You don’t want to be signing a contract if finance is going to be difficult.

Without an officially signed statement of loan pre-approval, some sellers and agents won’t accept your offer. Without it you can’t guarantee you’ll get the finance.

Conditional approval as it sounds is predicated on certain conditions that must be met, to move to final approval.  Final or unconditional approval is the final guarantee that you’ll receive finance for a property.

Mostly, if you have done everything properly for pre-approval and the property is valued correctly, there should be no major problems moving to final approval.

Although there are various issues that may jeopardise your final approval. For example:

  • Changes to your personal circumstances (eg: loss of income)
  • Changes to government regulations
  • A negative valuation of the property

Note: interest rates and lending policies are subject to change. Nothing is final until the final approval and loan documents are signed.

NOTE: This is not meant to be financial or professional advice and is only of general nature.  You must seek professional advice before taking any actions. The above information comes with no warrantees whatsoever.  We take no responsibility for any actions you may or may not take.