Pre-approval is a commitment from a lender that (in principle) you meet their criteria for a loan up to a certain amount, and that they will provide you with the finance once you find the right property.
“You don’t need to have decided which property you’ll purchase.” Obtaining pre-approval can take as little as 24-48 hours but this time frame can vary significantly from lender to lender.
Generally you’ll be required to complete a home loan application form and include all relevant documentation.
Once the lender has assessed and approved the application, they will issue a ‘pre-approval letter’ with a shelf life of generally between three and six months.
The pre-approval letter will usually indicate the maximum amount you can borrow therefore enabling you to determine which properties are in your price range.
Benefits of obtaining pre-approval can include:
- Peace of mind of your borrowing capabilities
- Greater bargaining power when dealing with real estate agents or venders as you’ll be treated as a serious buyer
- Finance can be organised quickly once you find a home to purchase
- Bidding from a position of power and safety at auctions.
Remember if you are the successful bidder at auction you’ll need to sign the contract and pay the deposit on the spot. You need to know how much you’ve got to spend!
Also note that pre-approval doesn’t necessarily mean your loan will be given final approval. The finance is still subject to the lender’s valuation of the property and any other terms and conditions on which the pre-approval is given.
Get your Pre-Approval now and find a cheap home loan with The Mortgage Report Card.
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