Article: Our House = Our Home

Dispelling  Pre-Approval Myths with Carie TownleyDispelling Pre-Approval Myths with Carie Townley

When you want to kick-start the home buying process, a loan pre-approval will get you on your way quicker. Not only will it make you look more appealing to vendors, it can also boost your confidence going into auctions. But beyond making you feel more powerful, can a pre-approval really make much difference? It’s worthwhile to have, as long as you’re clear about what it can and can’t do.

Firstly it’s important to understand what a pre-approval is. A pre-approval, also called a conditional approval, is an indication from a lender that your loan will be approved. Note ‘indication’ - it is not a guarantee. It’s a myth that you will be assured of the loan based on this alone. Your loan may still be rejected down the line, however having gone through this initial step, you’ll be getting started quicker.

Once you’ve provided your ID, bank statements, and details of your income and any assets to your mortgage adviser, the pre-approval process tends to be pretty quick. As you will be assessed on your financial history, a pre-approval will give you an idea about your borrowing power. This will help you come up with a budget. Knowing how much you can spend is crucial - it will keep you focused on what you can afford. Pretty handy to know come auction time! If this is the main reason you’re wanting a pre-approval, see if you can request a pre-qualification assessment. This tends to only take minutes to do and will give you this information without having to proceed with the formal pre-approval. But remember, this isn’t a pre-approval!

Yet actually having the pre-approval will show fellow buyers and the vendors that you’ve done your homework and mean business. This will put you ahead of other buyers who haven’t done this step. When markets are as competitive as they are, every little bit you can do to stand out helps.

While being organised ahead of time is important, it’s important to note that most pre-approvals are only valid for up to six months, some for only three. Confirm the expiry date so that you’re not left having to start over again. If you do have to, be aware that pre-approvals are recorded on your credit file, and the number you have can bring your credit score down. That’s why it’s wise to only apply with one lender rather than with multiple, as tempting as that may be. Having numerous pre-approval applications isn’t a good look, as this will make it seem like you’ve received rejections.

Should your circumstances change in the time period of the pre-approval (like if you change jobs), your application will need to be reassessed. It can be better to wait until you’ve made any major changes like this before looking for a loan.

But don’t hold off in fear - it’s wise to start the conversation early with a broker. They’ll be able to advise on whether you can proceed with the pre-approval, and what will help you get to where you need to be.

For a personal mortgage reduction analysis to identify the strategies that are in your best interest, contact Carie today on 0275 228 940, email .(JavaScript must be enabled to view this email address).


Leave your comment

Commenting is not available in this weblog entry.