A home loan pre-approval gives you the green light for a home loan before you start looking to buy. This can save you a lot of time and hassle. You can avoid properties that are outside your price range.
It also gives you negotiating power when you want to make an offer to buy. Your offer will be more attractive to a seller than an offer that is subject to finance. You may be able to negotiate a lower price and an earlier settlement date for your new home accordingly. The settlement date is when you can move into your new home.
Home loan pre-approvals are usually valid for three to six months, provided your financial circumstances don’t change.
How do you get a home loan pre-approval?
The pre-approval processes of different lenders varies. Some may only require you to fill out a form online, while others will have more formal written application documents. In general though, the more formal the pre-approval process, the less conditions that will be attached. A formal home loan pre-approval process can take three to five days (or longer).
If a lender’s website has a quick online loan pre-approval indicator, it’s important to understand that this only shows you the amount the lender may be prepared to pre-approve for you. You will still have to satisfy their lending criteria before formal pre-approval will be granted. This will include providing information that they can verify, such as evidence of your stable income and other documentation.
You can follow the three steps below to maximise your formal home loan pre-approval chances.
Step 1: Work out how much deposit you can provide
The more deposit you can provide, the less risk for the lender. If you’re a first home buyer, you may be eligible for the First Home Owner Grant or the First Home Loan Deposit Scheme to help you with your deposit.
Step 2: Review your overall financial situation
This involves listing your assets and any debt you have, as well as preparing a monthly income and expense budget.
Your budget should demonstrate your ability to afford home loan repayments. That will be any lender’s number one concern. Australian lenders are required by law to lend responsibly.
Step 3: Check your credit rating
A lender will check your credit rating (also called a credit score) as part of assessing your application. If you have a good credit rating, you’ll have a better chance of being pre-approved (and vice versa).
You can also check your credit score for free via credit reporting agencies like Equifax. If you have a bad credit score, improve it before you apply. You can do that by paying all your debts on time, as well as reducing the amount of debt you have.
How we can help you get your home loan pre-approval
At Wisebuy Investment Group in Newcastle, our experienced and licensed brokers can help you to get the right home loan pre-approval for your specific needs. And best of all, our service is free!
Contact us today for an obligation-free chat to find out more. We’d love to hear from you!