Pre-approval for a home loan can give you the power to shop with confidence, but it doesn’t last forever.
Mortgage pre-approval, also called conditonal approval, lasts 90 days from the date of initial conditional approval. This usually happens after the first few enquiries with loans.com.au, and acts to ‘get the ball rolling’ so to speak on your home buying journey. It also gives you some idea of the budget you’re working with when heading to auction or on your private treaty home buying process.
Now comes the start of the fun part - actually shopping for a home. As pre-approval lasts for 90 days, you have close to three months to find a home with that loan amount in conjunction with your deposit.
Pre-approval comes with a few distinct advantages when buying for a home either at auction or through private treaty:
At auction: At auction you are committed to buy the property once the hammer falls, and it’s no use in being the winning bidder if you can’t afford the price. Getting pre-approval gives you peace of mind and the confidence to bid, while staying within this limit.
Private sale: A pre-approval figure may help you negotiate in a private sale, and also shows to the realtor and vendor you are a serious buyer.
Think of pre-approval as your ‘safety net’, giving you confidence to shop, without letting you go overboard in the event of a hot auction or private negotiation.
A pre-approval is generally only an indicator of what your lender is willing to lend, and there is no obligation for the lender to hand over that amount! While it serves as a decent indicator, there are various factors that could impact your course of going from pre-approval to full approval.
Risky property: Homes that are generally considered high risk include inner-city apartments, houses in flood or bushfire-prone areas, or unconventional properties.
Rejected by lender's insurer: You’ll have to pay lenders mortgage insurance (LMI) if your deposit is between 10 and 20%. This also makes your approval at the hands of the mortgage insurer - in loans.com.au ’s case this is Genworth.
Changes in financial status during pre approval phase: Financial status not only includes the loss of a job, but also the addition of new debts such as a car loan, or the addition of a new family member.
Change in interest rates: Interest rates going up affect your mortgage repayment, which can eat significantly into your budget, and subsequently your ability to pay off the home loan. Any hikes in the Reserve Bank’s cash rate can also affect pre-approval.
Pre-approval is usually the link in the chain that comes after doing some basic research, such as:
Working out your borrowing capacity
Working out how much you can afford to repay
Looking at properties and the market or suburb you are interested in
Reviewing what’s on offer from your lender
Ticking these boxes are the first steps to starting your home buying journey, and after that comes the pre-approval step.
The short answer is yes. With loans.com.au you have 90 days to find a house under pre-approval. However, it can easily take longer than this to find your ideal home. Maybe that house you were looking at wasn’t as good as it looked online, maybe your ideal suburb is out of price range, maybe the suburbs in your price range are undesirable. Whatever the case, you can re-apply.
Pre-approval or conditional approval takes as little as 2 minutes with loans.com.au , and starts with filling out an easy online form.
A loans.com.au pre-approval lasts for 90 days, after which you must re-apply if you fail to find a home.
Pre-approval is generally seen differently as an official application for credit. However, if you apply through multiple lenders or more than a handful of times in a 12 month period, you run the risk of hurting your credit score - as it will likely appear on your credit history - especially if you get knocked back.
If you’re ready to start your home buying journey, get pre-approved by filling out our prequalify application in as little as 2 minutes, and speak with one of our lending specialists today.