Your guide to loan pre-approval

May 04, 2016
Rebecca Crommelin

When you are in the market for a home or investment property, certainty is a valuable asset. Loan pre-approval can help provide that certainty, letting you set a clear purchase budget, negotiate strongly when you find the right property, and bid with confidence at auction. 

What is loan pre-approval?

Loan pre-approval gives you conditional approval for a home loan or investment loan. It usually extends for a set period - typically three to six months - and provides an indicative guide of how much you can afford to borrow. 

Five good reasons to consider loan pre-approval

1. You have a clear spending limit

Loan pre-approval tells you how much you can borrow so that you can shop for properties that are within your price range and not waste your time looking at properties you can't afford. 

2. A financial safeguard

With loan pre-approval in hand, you are unlikely to make an offer, or pay a deposit on a property only to discover you are unable to secure finance to complete the purchase. 

3. Extra negotiating power

With your loan pre-approved, estate agents can see you are a serious buyer and in a position to act quickly. This can give you extra power when it comes to price negotiations with vendors. 

4. Bid with confidence at auction

If you are buying a property at auction, pre-approval is a must-have. When the hammer falls at auction, the highest bidder is committed to the purchase - there is no cooling off period. Having loan pre-approval in place means you can bid with confidence up to your approved loan limit. 

5. It costs nothing

Arranging loan pre-approval won't add to your purchase budget. There is no cost because the lender's normal loan application and establishment fees don't apply until you are formally approved for a loan. 

Even better, loan pre-approval is obligation-free. You are free to select a different loan and lender if you find there is another lender on the market offering a better product with superior features and a cheaper interest rate. 

Pre-approval pitfalls you should be aware of

Check if pre-approval is available

Not every lender offers pre-approval, so it's always worth checking if this feature is available through your preferred lender.

Watch the time span

When you are enquiring about loan pre-approval, be sure to ask for how long it lasts because it doesn't extend indefinitely. That's understandable, as your personal circumstances, and even the property market, can quickly change. 

If you haven't found your preferred property within the timeframe of loan pre-approval, you can simply apply again by providing updated personal details if anything has altered. 

Your circumstances may change

Pre-approval is offered on the information you provide at the time of applying. If your circumstances change following pre-approval, you may no longer be eligible for the same level of loan funding. 

Pre-approval is not a guarantee of funding

A key aspect to bear in mind is that loan pre-approval is not a guarantee of receiving a home loan. The property you are hoping to buy will act as security for your loan, so formal approval can only be granted once you have chosen the property that is right for you. 

As your local Blackwood Mortgage Choice broker I can help

  • As your local Mortgage Choice broker in Blackwood & Mitcham, I will provide you with access to our wide choice of lenders, including the major banks. We understand the loan pre-approval requirements of these lenders, making it quicker and easier for you to apply for pre-approval.
  • When you have found your ideal property, we can streamline your formal loan application by preparing the paperwork, lodging the application and doing all of the follow up on your behalf. 
  • There is no charge to you for our home loan service because the lender pays us after your loan settles. 
  • Our brokers are paid the same rate regardless of which home loan you choose from our wide choice of lenders. 

To secure pre-approval for your loan, contact us today at Mortgage Choice in Blackwood on (08) 8178 0700. 

Charlotte Gray,

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