Tips For A Home Loan Pre Approval
✅A home loan pre-approval is paramount to a smooth and fast loan approval.
✅Getting a home loan pre-approval before you start house hunting is key to a smooth process.
✅A real estate agent will ask about your finances before they invest time in you, so here's your chance to present yourself in the best light.
✅At least know your borrowing capacity before you start shopping. Just call Mortgage Broker Revesby to work it out for you; a rough guide can be given in 20 minutes over the phone. No fee; no pressure to continue.
✅Extensive documentation and lender research is necessary to getting approved. Give your mortgage broker as much time as possible to find you the best loan. We do all the work in getting it across the line.
✅Knowing the finance is approved is how you can be confident in bidding on a suitable home.
What does a Pre-approval involve?
✅There needs to be a credit assessment of your suitability for a home loan.
✅Your broker will need to determine your income, commitments and everyday living expenses. It's best to start with a simple borrowing capacity calculation to see if it's in the vicinity of what you need for your purchase.
✅Servicing just means your ability to repay your mortgage without difficulty.
✅It shortens the time taken for a formal approval once you make an offer.
What will the lender check?
✅Employment history
✅All assets including properties you may have
✅All liabilities and debts
✅Do you have a guarantor if the loan is borderline?
✅Credit history - your track record in paying other lenders back.
What documentation will I need?
✅I.D. such as a drivers licence or passport.
✅2 Pay slips and an ATO summary. Your work hours will be checked to ensure consistency with your application.
✅Funds to complete: you may need to prove your capacity to pay the purchasing costs such as stamp duty & mortgage insurance etc.
✅The postcode of desired suburbs will be needed to assess valuations.
✅Detailed expense summary - your broker will guide you through this to make sure it fits with lender policy. Your bank statements will be necessary to assess your expenditure.
✅A well presented lender application - this will be completed by your mortgage broker to assure it has the best chance of getting approved.
✅Credit card checks.
✅You will need to explain any recent or future changes in employment.
What are the benefits of a pre-approval?
✅Gives confidence and clarity to bargain and make offers.
✅Valid for 3 months. A further 3 month extension can be requested.
✅It is free; in fact Mortgage Broker Revesby never charges you a fee.
✅The real estate agent will ask; it helps show that you are worth putting effort into.
✅It creates the grounds for a fast formal approval.
When is the right time to apply for a pre-approval?
✅You should apply for your pre-approval before you start searching for a house. You need to know what your borrowing capacity is and whether you have enough 'funds to complete' your purchase.
✅Decide how much you want to spend on a house.
✅Work out affordable monthly repayments you can manage for the life of your loan. This should be done with your mortgage broker to make sure all aspects are included.
✅It's now you do the preliminary research into the prices of the properties in your area. The lender will assess your pre-approval based on their valuations for an area - it's NOT based on your purchase price. This is important to note in a red hot first home buyers market.
✅It's not recommended that you place an offer on a property before you secure your finance. The lender valuations of the property may not be inline with your offer, and there may be other factors relating to your income, assets and liabilities that have been overlooked. Simply entering your data into an online calculator and relying on the automated response is irresponsible.
✅Once you have determined your borrowing capacity and repayment ability, the loan pre-approval can be sought.
Can I make an offer now I have a pre-approval?
✅The conditional pre-approval is a step away from the formal approval. If all conditions of the pre-approval are met, there shouldn't be a problem. Examples of conditions are subject to pest and building inspections.
✅This will also depend on the conditions of sale made by the seller in a private treaty deal. This is different to an auction. Ask your solicitor or conveyancer about these matters.
✅All conditions on the offer must take into consideration the duration required for the home approval. This is confirmed before with the lender.
✅If bidding at auction, you must have your finance organised first. It requires your deposit and ready financing after the offer is accepted. You should have a formal approval from the bank before you bid at auction; you may forfeit your deposit if your finance is declined.
✅Best to see a solicitor before bidding at auction.
Can a pre-approval be declined at formal approval stage?
✅Yes!
✅Poor credit rating: previous loan defaults etc...
✅Lack of proof of income; especially for the self employed.
✅Recent life changes that you didn't disclose at pre-approval. This can include a recent employment change, falling pregnant and losing an income etc.
✅Too many credit enquiries on your report; this will lower your score.
✅A recent increase in interest rates will lower your borrowing capacity. Higher interest rates will lower your ability to service the loan.
Always present your offer with a clause, "subject to finance approval." Don't get pressured in a red hot buyers market.
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