Getting pre-approved for a home loan can be a good way to arm yourself with a budget so you know what you can afford, but here are five things you should know about pre-approvals.
Pre-approval is vital in knowing where you stand and knowing how much you can borrow. Sellers and real estate agents may prefer or prioritise buyers that have pre-approval from their lender. This is because getting pre-approval can shorten both the home selling and buying processes. Real estate agents could also ask for a pre-approval form before taking your offer on the home seriously.
There’s a few mistakes buyers may make about the pre-approval process. Some are:
Not knowing there’s an expiry date: Generally, pre-approvals are valid for three to six months, as the market and a borrower’s financial circumstances are more likely to change after that time.
Not having full documentation: Not having full documentation such as identification, payslips, bank statements and more can bog down the whole process. You must also disclose other loans or credit cards you have.
Not informing lender of lifestyle changes: This includes having a child, dropping back to part-time work, and taking on a new loan or credit card.
Shopping for a disapproved property: Some lenders don’t lend for certain properties or homes such as particular apartment blocks, hobby farms or large properties, or a fixer-upper. A property next to large power lines and even whole suburbs could be on the exclusions list.
The good thing is, you can usually find out your desired home or property has the green light in the first couple steps of getting pre-approval, potentially saving you time.
The short answer is no, not always. To have the best chance of securing pre-approval, there are certain things to keep in mind. For example, as mentioned before, not changing jobs and having steady employment can increase your chances of getting pre-approval. Additionally, market forces outside your control, such as Reserve Bank cash rate changes, can also affect your ability to get pre-approved. Unsuitable properties, such as those mentioned above can also mean your application is rejected.
Yes, it could. Every time you apply for a pre-approval, the lender you apply with runs a credit check. This then leaves an enquiry on your file, as part of the comprehensive credit reporting system. Too many enquiries could impact your credit score in a negative way. This is why it’s important to only apply with the lender you’re serious about getting a home loan with.
Getting pre-approved for a loan is just one small step in the home buying process. With loans.com.au the first step is to fill out a short online form, and from there your borrowing power is calculated, and you can then start house hunting. However, it’s important you have all the right documentation ready so we can get your loan approved and to settlement as soon as possible.
If you’re ready to arrange your loan pre-approval, talk to one of our friendly lending specialists today on 13 10 90 or arrange a time using the form below:
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