The importance of obtaining a reliable pre-approval

Move forward with confidence with a pre-approval

There are many steps before purchasing a property, from saving for the deposit through to researching interest rates and choosing a neighbourhood. Obtaining a loan pre-approval is one of the most important steps of all, with this simple yet critical process being a necessity prior to house hunting and negotiation. While it’s important to be aware of the limitations of pre-approval, there is no better way to move forward with confidence.

What is pre-approval?

A loan pre-approval is an indication from a lender that, if all goes well with your formal application, they may approve your loan. For the pre-approval, the lender will verify some of your financial information and tell you an expected loan size for you to work with when you look at properties. Also known as conditional approval or indicative approval, this in-principle agreement comes with no guarantees and lots of conditions. While the informal nature of this process may seem like a waste of time, pre-approval from a reliable source is the only way to get an accurate idea of your mortgage limits.

Benefits of pre-approval

The Australian housing market is extremely diverse and competitive, with pre-approval helping you set a realistic budget, filter your searches, and put your best foot forward. If a lender pre-approves you for a specific amount, you can limit your house hunting to properties within that limit. While this process can be sobering in some instances, it helps to save you time and gives you realistic expectations. A pre-approval can also be positive when it comes to negotiations as potential sellers and agents will be much more likely to take you seriously when you have one.

Pre-approval types and documentation

There are two types of pre-approvals in Australia: full or manual assessment, and system generated or on-the-spot assessment. A reliable assessment normally takes a few days and requires a lot of paperwork. In contrast, system generated pre-approval is often nothing more than a sales technique. While some automated pre-approvals require documentation, proper checks are not carried out and they may be available within the hour.

Despite the conditional nature of the pre-approval process, banks and other lenders do require documentation. Along with a standard 100-point identification check, lenders may carry out a credit check and ask for proof of income, employment, savings, assets, and debt. Reliable pre-approval involves a background check and the completion of an extensive application form.

In order to ensure your pre-approval is reliable, it may be necessary to ask your lender a few questions. Has your application been through a credit check? Has it been approved by the lender’s insurer? What are the conditions that could lead to a decline? While a pre-approval is a great first step, your mortgage approval can still be declined if your situation changes, the property doesn’t meet certain conditions, the lender’s insurance company rejects it, or it expires after the common three or six month period.

Book an appointment with our Lending Specialists, Jayden Chen or contact us today on (03) 9835 8200 if you would like to discuss your situation and how to obtain a reliable pre-approval.

About the Author
Accru Melbourne , Melbourne
Accru Melbourne delivers positive financial solutions through exceptional client leadership. We’ve managed clients’ financial needs for more than 150 years and have a team of nearly 100 professionals delivering responsive, personalised and proactive financial solutions for both individuals and businesses across business advisory, audit and wealth management services.
Want to join the team?