How long does mortgage pre approval last?
Find out how long pre-approval lasts and how you can find your new home with confidence with loans.com.au
A pre-approved home loan can give you the power to shop with confidence, but it doesn’t last forever. To get the most out of your pre-approved home loan, it’s best to understand both its limitations and benefits.
How long does a home loan pre-approval last?
For most lenders, home loan pre-approval lasts up to 90 days from the date of initial conditional approval.
Pre-approval or conditional approval takes as little as a few with loans.com.au’s easy online form. All you need to do is fill out a simple online form. If you need assistance, our friendly lending specialists will be more than happy to help.
There are times when the home loan pre-approval lapses before borrowers can find the right home. In those cases, you can ask the lender for an extension or reapply for pre-approval. After you’ve re-submitted the needed documents, you’ll receive an updated pre-approved letter with a new expiry date.
What are the requirements for a home loan pre-approval?
You need to submit certain documents such as a government-issued ID, proof of employment, income, details of assets and liabilities, savings, and expenses. If you have additional sources of income, like rental properties, you must submit proof of those as well.
What are the advantages of a pre-approved home loan?
The most useful perk of a pre-approved home loan is knowing how much you could potentially borrow. Having a clear budget makes shopping around for a home much easier and faster. You can narrow down your options and stop wasting time viewing homes that are out of your price range.
Home loan pre-approval comes with a few distinct advantages when buying a home at auction or through private treaty:
- At auction: Once the hammer falls, you’re committed to buying the property. But it’s no use 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-approved home loan gives sellers the impression that you’re a serious buyer ready to make that purchase. A pre-approval can also help you at the negotiating table as it shows you’re prepared and have made moves to finalise your home finance.
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.
Does pre-approval guarantee a home loan?
A pre-approved home loan does not guarantee a home loan. Your home loan pre-approval is only an indicator of what your lender is willing to lend, given the information provided. While it serves as a decent indicator, various factors could impact your chances of getting full approval.
Factors that can negatively impact your home loan application
- Risky property: Homes that are generally considered high risk include houses in flood or bushfire-prone areas or unconventional properties.
- Rejected by lender's insurer: You’ll have to pay the lender's mortgage insurance (LMI) if your deposit is less than 20% of the property’s value. This also means your approval is in the hands of the mortgage insurer.
- Changes in financial status during the 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, which is usually passed on to customers through lender rate increases.
When is the best time to apply for a pre-approved home loan?
It’s a good idea to get a home loan pre-approval when you’re serious about buying a property. You’ll have a better understanding of the costs of a loan and what your repayments would look like.
A pre-approved home loan is helpful when you’re:
- Working out your borrowing capacity
- Working out how much you can afford to repay
- Looking at properties and the market or the suburb you are interested in
- Reviewing what’s on offer from your lender
Ticking these boxes is the first step to starting your home buying journey.
Can I get pre-approval from multiple lenders?
It’s generally not advisable to apply for a pre-approved loan from different lenders at the same time.
Pre-approval is generally seen differently from an official application for credit. However, if you apply through multiple lenders or more than a handful of times in 12 months, you run the risk of hurting your credit score, as it will appear on your credit history.
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About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
