The mechanics of home loan pre-approval

Get it before you make an offer

Once you’ve found your dream home, it can be hard to concentrate on anything else other than making an offer. But without pre-approval, that dream home is far less likely to become a reality.

Making an offer on a home without first confirming that your bank will lend you money can only end in tears – you’ll be high and dry without the finance to complete the purchase. This is where home loan pre-approval comes in – and thankfully, the process is relatively easy with the help of a professional mortgage broker.

Here’s what you need to know to get started:

What is mortgage pre-approval?

Mortgage pre-approval is an indication of how much your lender is willing to loan you if your financial circumstances allow it. With pre-approval, you can make offers and bid on properties, knowing that you’re able to get a loan to finance the purchase.

Pre-approvals are free, and valid for three to six months. Having one will make the entire buying process easier and smoother.

Getting your finances sorted

There are a few things you need to check before applying for pre-approval. Getting your financial ducks in a row will help your lender see that you’re capable of managing your money – giving you a much better chance at pre-approval.

• Check your credit report – including past debts, loan applications, late payments, bankruptcies, and your repayment history. Your credit score can impact on the outcome of your application if your lender isn’t confident in your ability to repay a future loan. Be sure to check for errors and have them fixed.
• Consolidate any debt – then work quickly to get it paid off.
• Get saving – save as much as you can before applying for pre-approval. The more savings you have, the better chance you have of a successful application.

Prepare all necessary documentation

The pre-approval process generally involves the exchange of financial documentation. Being prepared for this stage of the process will make the application much easier. You’ll need:

• An application form – complete with all supplementary forms attached
• ID – passport or driver’s license
• Proof of income – tax returns or payslips
• Record of savings – bank statements
• List of current debts – credit card or loan statements

Working with a mortgage broker can help you with the specifics, make sure you’re fully prepared with the necessary documentation, and give you the best chance at pre-approval.

Remember – you’re only conditionally approved

Great news, your application has been approved. But don’t forget – it’s only conditional. This means when you go house-hunting and find a place that you like, your lender will need to be happy with the house, your finances, and the price of your conditional offer – before committing to the loan.

This all needs to happen before your offer can go unconditional – which includes placing a bid at auction. Again, this is where mortgage brokers come in handy – send the listing to them and they’ll get it sorted for you.

Seek expert advice

Securing a home loan can be hard work, especially if ‘mortgage-talk’ isn’t a part of your natural vocabulary. You need to consider which lenders work best for your financial situation, know what application forms to fill out – and understand ‘where to next’ if your application is denied.

Getting the right help is not only recommended – it’s necessary during the pre-approval process. Here’s why:

• Insider knowledge and experience – mortgage brokers are experts in the home loan pre-approval process and have spent years cultivating trusted relationships with lenders.
• Finding the right fit – they’re up to date with the market, know what loan options are out there, and can find you a lender that best fits your needs.
• Minimising risk – they have your best financial interests at heart and can provide expert advice to help you minimise risk.

Get the right help – then say yes to the house

Even though pre-approval is only one part of the entire home loan process, it’s an important and essential one. There’s a lot riding on getting pre-approval if you want to own a home – so why not have expert help on your side?

Mortgage brokers are your advocates throughout the entire pre-approval and home loan process, including helping you fill out application forms, organising financial documents, giving you advice and finding a great home loan rate.

Want to find out more about getting pre-approval for a home loan? Talk to a Global Finance mortgage broker today.