A pre-approval although not always the same across each lender is a preliminary approval of a proposed loan from the lender to the applicant.
Some pre-approvals are credit assessed by the lender meaning a credit assessor reviews your details such as:
- credit score
- the proposed loan amount and loan to value ratio
- whether the income services the proposed debt and
- whether the proposed application suits the overall policies and parameters for that lender.
The assessed pre-approval will usually be subject to valuation and suitable property being located and is also subject to any changes in the applicants personal circumstances.
Not all pre-approvals are fully credit assessed and may only be system assessed, meaning they take only into account the information electronically entered - they would only be fully assessed when a property is purchased and a formal application can take place. These pre-approvals carry less value when being prepared for auction as the supporting information has not been assessed and verified by a credit assessor (even though all pre-approvals are subject to re-review).
If going to auction or purchasing without a finance clause, it is recommend to do a pre-approval which is credit assessed and not just system assessed. Although this does not eliminate all chances of a formal loan being declined, it reduces the chances and highlights issues that might be encountered for an individuals loan application.
If you have any further questions about mortgage pre-approvals please give us a call at the office on 03 9585 7779 or contact us via home loan pre-approvals.