What exactly is a Pre-Approval?
Some people may not know exactly what a pre-approval is? It simply means that a lender has agreed, in principle, to lend an amount of money that can be put towards the purchase of a home. A pre-approval does not mean that there is a full or final approval in place.
Benefits of a Pre-Approval
The main benefit of gaining a pre-approval before you embark on your journey of purchasing a home, is that you will know your limit. This will enable you to narrow your property search, negotiate with more certainty and bid with more confidence if you are planning on going to an auction. A pre-approval is not a compulsory requirement but a necessary step in purchasing a family home or that investment property.
Purchasing a house and knowing exactly how much you can spend before you bid or make an offer can be a difficult process. It often happens that you find the property of your dreams or that perfect property to develop and have no idea whether it is within your budget. If a pre-approval is in place, it will usually be for a specific amount, so you can be confident in making ‘that offer’ or focus your house hunting on properties that are more affordable for you. If you are bidding at an auction, you will also know what your maximum bid can be! A pre-approval has also been known to make you a more attractive buyer to a seller as it shows that you are organised, serious about the property and confident in your offer. Offers with a pre-approval are usually less likely to be withdrawn due to a lack of finance, (if circumstances do not change).
Pre-approvals are only valid for a certain period of time, and can vary between banks and lenders. Having several pre-approvals in a short period of time may harm your potential to borrow as they appear on your credit file as a loan enquiry and having many in a short space of time might create a negative impression. This should not discourage you from applying for a pre-approval but it does mean that you should be seriously considering a purchase, not just ‘toying’ with the idea of purchasing property. There are calculators and tools on our website https://www.bernielewis.com.au/how-much-can-i-borrow/ to assist you with getting an idea of how much you might be able to borrow.
Pre-Approval Misconceptions
A pre-approval does not mean that your loan is guaranteed to be approved. It might mean that you are more likely to have your loan approved, but it is not a guarantee. Changes in personal circumstances, government regulations, a negative valuation on the property or a change in the property’s condition are all factors which can often affect whether your pre-approval proceeds to a full approval.
If you have any questions or concerns about the pre-approval process, please contact us on 8300 8300 or visit https://www.bernielewis.com.au/contact-us/ to speak with one of our mortgage brokers today!
