5 things you should know about loan pre-approval
Getting a loan pre-approval is a smart idea, but there are a few things you should know
Unless you keep gold bullion under your bed, you probably need to borrow money to buy your next property. How much can you spend? Enter the loan pre-approval.
A pre-approval is a conditional lending document that is a must for prospective property buyers; it gives you confidence around the question of ‘how much can I afford to borrow?”
Here are five more facts about pre-approvals you really need to know.
- Pre-approvals help get things underway
If you have pre-approval it means your lender has assessed your ability to pay future borrowings up to an agreed amount. Remember that your approval is still conditional until you’ve found a suitable property – generally, you have 90 days – and the bank has completed its formal approval process, including a valuation.
- Pre-approvals can speed things up
If you’ve got pre-approval before you go home shopping, moving to unconditional status should be quicker before settlement. It can make the process quicker and less stressful when you do finally find somewhere you want to buy.
- Many names, same thing
Securing pre-approved home loan funds can seem overwhelming, You will hear a lot of terms being bandied around – pre-approvals, conditional approvals, approvals in principle – but they are actually all the same thing.
Word of warning – “Indicative” borrowing figures generated by online calculators are not mortgage pre-approvals and should be used as guides only.
- Pre-approvals help you ‘keep it real’
One of the best things about gaining pre-approval is that you know if a property is in your price range. It helps you with budgeting and helps you set realistic expectations around what you can afford to buy, which is particularly valuable for home buyers.
- Less is more – apply wisely
Every time you submit a pre-approval application, it will appear on your credit history as an “enquiry”, Lenders will start to ask questions if there are too many in quick succession.”
This is why your broker will help you select a suitable lender for your individual circumstances and goals, then guide you through the process one application at a time.
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