Home loan pre-approval is part of the many stages of getting a mortgage. It lets you see how much you can borrow and what interest rate you’ll face so that you can find suitable properties in your budget. It also helps to speed up the final home loan approval process, saving you time and stress in the long run.
In this article, we’ll cover everything you need to know about home loan pre-approval.
Let’s get to the following commonly asked questions:
Home loan pre-approval, often known as conditional approval or approval in principle, is an initial assessment of your home loan eligibility carried out by your chosen lender.
The assessment indicates your borrowing capacity to help you better budget for your new home. Home loan pre-approval happens before submitting your application for a mortgage and is an attractive document for lenders.
So, you’re wondering why you should bother applying for pre-approval before house hunting.
Loan pre-approval gives you a good indicator of how much your chosen bank will lend to you, so you can look for homes that are within your realistic budget. This helps you avoid looking at homes you can’t afford and stops you from wasting time. With a pre-approval guarantee, you’ll have a clear picture of your borrowing power.
It also gives you an edge when making an offer on a property, as sellers know that you meet the necessary home loan requirements. With an approved pre-approval application, you’re showing sellers that you’re serious about buying their home, which could give you a headstart over other buyers.
Note: By taking the time to get pre-approval before you dive into house hunting, you can stay in control of your finances and budget and improve the chances of becoming home loan approved.
Before you receive pre-approval, you’ll need to assess your financial situation — how much can you afford to pay towards your mortgage every month? How much deposit do you have saved in your bank accounts? Do you want a fixed-rate or variable-rate mortgage? These questions will help you decide which home loan provider is best.
Here are the typical steps you’ll need to take during the pre-approval process:
Additionally, minimising or paying off outstanding personal loans and credit card balances can improve your overall financial profile and increase your borrowing capacity.
Getting pre-approved can take a few days to a couple of weeks, depending on factors like the lender's workload, the complexity of your application, and how quickly you provide the necessary documents.
The process typically starts when you submit your home loan application and supporting documents. From there, the lender will review everything, assess your financial status, and conduct credit checks to ensure you’re a responsible borrower.
If all goes smoothly and they don't need additional information, you might receive your pre-approval letter within a week.
Important: If you’re struggling with the approval process, or pre-approval is delayed, contact a home loan specialist to help further with your application. Bank statements, personal loans, and credit scores are some of the factors they can assist you with.
If you’re waiting for home loan approval, don’t panic! Nothing is likely wrong, and your chosen lender is taking the time necessary to review your application thoroughly
Having said that, there are some factors that can affect your wait for pre-approval.
Ready to own a slice of the Australian property market? Start the pre-approval process today by following the steps covered in this article. At WeMoney, our home loan experts will guide you through the process by helping you to compare home loans on offer.
With our expertise, you can make informed decisions about mortgage loans, investment loans, and even loan refinancing, ensuring you have all the details you need to navigate the home loan process confidently.
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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.