Unpacking the Pre-Approval

Have you decided to buy a property but are confused about the next step?

Like most Australians, you know you will most likely need to take out a loan to be able to afford a house, but aren’t confident about how to go about applying for one. Applying for a loan initially, means you will need to obtain a pre-approval – or a conditional approval – to indicate a lender has verified an amount they will allow you to borrow. A pre-approval will both show the seller your interest in a property is serious and will give you an idea of how much you can spend.

How can I get one?

Before applying for a pre-approval, it is best to organise a meeting with a mortgage broker who can arrange one for you. They will be able to paint you a picture about the amount you will be able to borrow. Usually, they will advise you about what to bring to the meeting, (information about your financial circumstances), and use it to determine an approximate borrowing amount.

If you are happy with the outcome, you can then proceed in filling out a pre-approval form. Most lending institutions and banks offer them on the spot. However, a mortgage broker will go that extra step to support you through the process. They will be able to browse through different lenders and their varying loan conditions to find the right one suited for your circumstances.

What do I need?

To apply for a pre-approval, you will need to give the broker a complete idea of your financial circumstances. You can do this by providing them with evidence of your income, assets, any existing debts or current loans, and your living expenses. This information is usually provided in the form of pay slips or tax returns, any previous loan statements, credit card and savings account statements, and all required forms of identification.

At this point, you will need to consider the size of your deposit, conveyancing fees, and stamp duty which may affect the final amount you will be able to borrow. Keep in mind that you might not be able to borrow the initial amount indicated in your pre-approval depending on a variety of circumstances.

How does it work?

On receiving all necessary information, the broker will assess your ability to repay a potential loan and determine the amount to lend you. You need to make certain that all information you provide is correct and accurate, and all relevant documentation submitted verifies your deposit, assets, liabilities, income, and personal details.

Once the lender is satisfied with your circumstances and your ability to repay the loan, the broker will send you a certificate conditionally approving the loan. These are usually valid for 90 days after initial approval, however, serve as an indication rather than a loan guarantee.

What happens now?

Once your pre-approval has come through, you will be able to begin house hunting with confidence. After looking around and deciding on the perfect home, you will then be ready to apply for the full approval of your loan. Your mortgage broker is an incredibly helpful resource as they will be able to guide you through the complete application process.

At Select, we offer quality, no-obligation, and free advice to help your reach your financial goals. If you want to get an idea of how much you can afford to borrow, or would like to assess your current finances, contact one of our friendly brokers to determine your eligibility for a loan.