Pre-approval is a lender’s assessment of your likelihood of being approved for an otherwise suitable loan. The appraisal is made on the basis of your ability to service a loan by looking into your living expenses and liabilities, your credit history, your employment circumstances and how often you have moved home or employment in the recent past.
As it is performed prior to a property being found and chosen, it does not take into account the particulars of a specific property and valuation, which is why uncertainties can arise.
Pre-approval is helpful for those who want to know how much they can borrow before attending open homes, and can be reassuring for new borrowers. It gives some certainty in terms of knowing your price range, and comfort in knowing that a lender has looked at the application to make sure it meets policy.
Pre-approvals are usually valid for up to 90 days but, depending on the lender, may be renewed to allow more time to find a property.
It is very important to note that a pre-approval is not a guaranteed loan. It is your potential lender’s way of signalling how much they expect to lend you. This may change on your official application. Before formalising the loan the lender will want to check that your circumstances haven’t changed (such as taking out another credit card or changing jobs).
Your pre-approval will also usually be conditional on a property valuation. If your lender does not deem the property a marketable asset, they may not approve a loan.
Speak to us about pre-approval before you lock in your Saturday open home schedule.