Are you ready to buy a property? For a large majority of buyers this will mean obtaining a loan! Although you cannot completely finalise a loan prior to signing a contract on a property you can obtain a pre-approval.
A pre-approval, conditional approval or approval in principle is the closest you can get to a full approval prior to signing a contract. This is your indication from the lender of whether they will lend you the amount you require to purchase your new property.
Some vendors and real estates will ask if you have one prior to making an offer- it helps them to know you’re serious about buying.
Some simple steps to follow when you wish to organise your pre-approval
1-Collect your Financial Information
For your broker or lender to be able to advise you what you can borrow they need to know what you can afford. To do this they need a complete picture of your financial situation. This includes not only your income but also your living expenses (e.g. food, petrol, insurance), any personal finance commitments such as personal loans or credit cards as well as a detailed list of your assets.
Verification of these items is also required this means providing a minimum of the following paperwork
2-Meet with a Lender or Broker
Make your appointment to meet with a local Mortgage Broker or lender. They will advise you of the specific information they require you to bring to your meeting which will include ID. During your meeting your Broker or lender will discuss your situation and you will provide them with the information outlined above. The process will be different if you see a Broker vs a Lender as the Broker will be looking at which lender on their Panel will best suit you. They may need to complete their research after your meeting to ensure they make the best recommendations and will come back to you later with their recommendations and request your approval to proceed to an application.
3-Undergo a Credit Check
An important part of a pre-approval is the lender performing a credit check to find out if you are a suitable candidate for a loan with them. If you have adverse history or marks on your credit file this may affect your ability or to borrow money. If you are aware of any adverse issues you have with your credit file you should mention this to your broker in your initial meeting so that they have the information to source a suitable lender.
Assuming your credit rating and application is acceptable you will receive your pre-approval. You can obtain a certificate from the lender if required. This pre-approval is usually valid for up to 90 days. Remember- This is not a guarantee of loan approval, it is only an indication based on your income, expenses and credit check of what you would be approved for.
Some lenders will provide you with a list of conditions which would need to be met to obtain an unconditional approval.
Keep in mind you must also take into account the size of your deposit, you can use this pre-approval to figure out your top purchase price. Be sure to factor in other costs such as conveyancing fees, stamp duty and so on.
Once you find a property, place an offer on the house and it is accepted you will then apply for your full approval. At this time ensure you get in touch with your lender or mortgage broker and they will advise what additional information is needed to complete your Unconditional approval.