What is a pre-approval?

Pre-approval is a great way to provide yourself with the comfort of knowing how much you can offer for a property

 

What is it?

A pre-approval is a letter from the bank stating they have assessed your creditworthiness and have decided you are within policy and your ability to repay is sufficient for a loan of x amount. The bank will assess your income, liabilities and other contributing factors (such as your credit history, length of employment and how your deposit is made up) and “approve” you for a loan.

 

How long does it last?

A preapproval generally lasts for 3 months but can be 6 months with some lenders. You will also have the option to extend your pre-approval if you haven’t found your dream house in that time.

 

Am I guaranteed finance?

Having a pre-approval does not mean you are guaranteed formal approval for a few reasons. A pre-approval is always subject to finding a property that the bank deems suitable and is valued at the purchase price. Another reason is that a preapproval is for a certain loan amount, LVR and loan structure, if you find a place for more money than you originally anticipated the bank will need to reassess your application. Another big thing to be aware of is that a pre-approval granted over a website or over the phone in a few minutes have not assessed your ability to repay the loan which means they offer no guarantee at all.

 

Come and visit us today to discuss pre-approvals and get you on your way to purchasing your next home!

Posted in: Home loans

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