Purchasing a property can be stressful enough, considering the amount of coin you are dealing with. Getting a pre-approval from your lender before you make an offer on a property should bring you some peace of mind and ensure that you won’t end up in serious hot water.

A pre-approval is an indication from a lender of how much they are willing to lend you. It is not a guarantee, however, and can change if your circumstances change or if you don’t meet the set conditions. Equally, there are no obligations on your part to proceed and finalise a loan with that bank.

When planning a property purchase, there are a number of benefits of getting a pre-approval:

• It gives you confidence that you can afford your purchase when putting in your offer.
• It allows you to act quickly when buying, which may be necessary if there is a demand for the property.
• It shows sellers and agents you are serious about purchasing and gives them confidence in you.
• It helps you narrow your search criteria to properties you can afford, so you aren’t wasting time.

How does the process work?

• You will need to have your financial information ready to go before you apply (such as income, debts, assets, expenses and financial situation). You should also know what type of loan features you require.
• Your mortgage adviser can guide you through this and advise you on the most suitable loan options. They will then submit your application to your chosen lender.
• The lender will assess how much they are prepared to lend you. They may also perform a credit check and may want to know what type of property you plan on purchasing.
• Your adviser will let you know the outcome of your application, including any conditions that need to be met such as finding a suitable property and receiving the expected (registered) valuation and acceptance of Lenders Mortgage Insurance (LMI) by the mortgage insurer (if applicable).
• When you find a property, let your adviser know and provide a copy of the contract of sale. They will work with you to complete a request for formal approval of the mortgage.

What to be careful of:

• If you have applied for more than a few pre-approvals with multiple lenders within a short timeframe, it can look bad on your credit history as it may appear that you have made several unsuccessful applications.
• Pre-approvals are typically only valid for 90 days, so don’t apply unless you are ready to buy.
• If you’re not quite ready to buy, you can use online tools and calculators to get a general idea of your borrowing capacity or ask your mortgage adviser for an estimate.
• Final approval will require a valuation of your new property. If the valuation is lower than the price you paid, this will reduce the amount you can borrow.

Every home loan situation is different. Call Smartline Rockingham to discuss your home loan today!