A home loan pre-approval is an important part of the home purchase process, which can provide you with an ‘approval in principle’ for your proposed finance scenario. In other words, a quick ‘yes or no’ outcome on your credit application with conditions to be met before you can obtain a formal approval.

Posted in: Insights

23/08/2019

Pre-Approval

A pre-approval can provide purchasers with confidence that the required finance should be formally approved before heading into an auction, or an offer on a property. They also provide a vendor with peace of mind, suggesting that the potential purchaser’s offer is legitimate, with less risk than an offer without pre-approval.

Pre-approvals enable a smoother purchase process, which can reduce the time it takes to receive a home loan approval, and allow for shorter settlement window.

In short, a home-buyer with a pre-approval = a home-buyer with greater negotiating power & a head start.

Impact on credit score

Like any other application for credit, a home loan pre-approval will appear on your credit report, and stay there for at least 5 years.

Whether or not your finance was approved, decline or not proceeded with, the enquiry will still be recorded. It will list the name of the lender, application date, type of lending and the amount sought.

When making an approval decision, some lenders may factor in the following:

  • the amount of enquiries within a certain time frame.
  • an explanation of your enquiries and whether they proceeded or not.
  • credit score: which could factor in your number of credit enquiries, the type of enquiries, the amount of enquiries and your credit score, amongst a range of other factors.

If you seek pre-approval with multiple lenders, your credit score could take a dip… especially if you are declined.

On the other end of the spectrum, an approved home loan application can have a positive impact on your credit score, which is why it is important to be selective.

How Mortgage Brokers can help

Mortgage Brokers can provide the peace of mind buyers require through the process of finding & choosing a suitable lender before applying for credit. This can include:

  • obtaining a credit report (without impacting negatively on your credit score).
  • finding a suitable product for you to choose, from multiple suitable options.
  • ensuring you can meet a lender’s policy requirements.
  • assessing your borrowing capacity and serviceability through the lender’s own assessment calculators
  • formulating purchase scenarios based on your affordability, borrowing capacity and deposit position
  • accurate processing and presentation of a pre-approval application to your lender of choice

In doing so, a Mortgage Broker should enable your credit report and score to be impacted positively by limiting to one single credit application to suitable lender chosen by you. The credit application will also be professionally presented and processed, which in today’s strict responsible lending environment can be very valuable for a borrower.

Aside from just obtaining a pre-approval, a Mortgage Broker can assist with additional property data and the adjustment of borrowing scenarios to assist with your decision making during the property hunt. For peace of mind on your journey, call 8300 8300 to speak with a Bernie Lewis Home Loans Mortgage Broker.

 

*The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice. The figures used in this article are to be used as a guide only. Depending on your personal circumstances, these numbers may vary. We recommend you seek individual advice with a mortgage broker.