What is a pre-approval and why is it important

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A pre-approval will guide you on how much you can borrow especially where you have varying income or self-employed income. Were your circumstances are unique, the bank is very interested in knowing the facts behind your scenario and obtaining documented evidence to support it – this is an important key to having a difficult loan approved. Having a pre-approval will give you the confidence to bid for your next home knowing what your budget is.

A standard pre-approval generally takes 2-4 business days from the time of submission, depending on the bank you pick. If the loan is complex, or if you are self-employed, or the lender is busy, then the pre-approval can take longer.

Why is a pre-approval important

A pre-approval provides a clear guide on the purchase price

Falling in love with a property that is too expensive can lead to disappointment or putting yourself in a position where you are unable to make the loan repayments. Having a pre-approval is a great indication from the lender that you are eligible for a home loan, and it gives you a clear property budget to start house hunting.

A pre-approval saves time and lets you move quickly

Once you have found a house you want, the next step is minimising the risk of losing out on the deal because you are waiting on getting your finances in order. Getting pre-approved early on means you can move forward by making a serious offer to the vendor and gives you confidence that your loan can be organised quickly. It signifies to the vendor you are a serious buyer and allows you to negotiate more favourable terms.

A pre-approval helps to protect your deposit

You can easily lose your hard-earned deposit if the lender won’t approve the loan amount you desire to complete your purchase.

A pre-approval can give you a financial safeguard in two ways:

Offering a holding deposit only (which is 0.25% of the purchase price) – this will provide you up to 10 business days to move the pre-approval to Formal Approval.
Protecting you when participating in an auction – if you’re buying at auction the deposit you pay is not refundable. Certainty of a pre-approval can save the day.

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