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 organise your loan pre approval up front.
A pre-approval, also known as a 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 funds you may be able to obtain to purchase your new property.
Below we outline the basic process for you when obtaining a pre approval. Keep in mind each situation is different and may vary slightly!
1-Gather your Financial Information
For your broker 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 , any personal finance commitments as well as a detailed list of assets.
Verification of these items is also required. This generally means providing a minimum of the following paperwork
- Payslips and PAYG Summary
- Tax Returns and Notice of assessment (If self employed)
- Loan statements for existing Loans and credit cards
- ID (drivers license, passport)
- Statements on your day to day and savings account
- A complete living expenses declaration
- Information on all assets held
Sometimes clients feel the information brokers request for a pre approval is excessive. By obtaining this information upfront we are getting a good snapshot of you as a borrower. This not only helps us to give you the most accurate information possible but also, when applying for a pre approval it allows us to put forward a strong and accurate case to the lender.
Use our online calculators here.
2-Meet with your Broker
Make your appointment to meet with a local Mortgage Broker and bring along all your information! Your broker will send you a list of things they require which may be more of less than above. Remember any information you fail to provide may hold up the process!
During your meeting your Broker will discuss your situation and understand what it is that is important to you. They will discuss your loan, your plans, your financial situation and time frames to achieve your goal. All this information will form part of the considerations for your brokers recommendation of lender. As brokers have access to more than one lender it’s possible you may not be provided with a recommendation of lender at your meeting. Your Broker may take your information away and research options to ensure recommendations which are suitable to your circumstances are provided.
3-Complete the paperwork
Once your broker has provided recommendations for a lender and you accept they will request you to sign the applicable lender forms. This will allow them to apply to the lender for your pre approval. All lenders have their own forms and requirements. Your broker may ask you for additional information to satisfy the lenders requirements before applying.
4-Application to the bank
Your broker will put together all your information, their supporting commentary and submit to the lender. The lender will assess your application based on a number of different criteria. This includes your income, Employment stability, Savings history, deposit. They will also perform a credit check. They use this information to assess whether you are a suitable applicant for a loan with their bank.
A credit check is an important part of a pre-approval process. If you have adverse history or defaults on your credit file this may affect your ability to borrow money with this lender. If you are aware of any adverse issues with your credit file always bring this up at your initial meeting. This will ensure that your broker can make suitable recommendations with this in mind.
4-Obtaining Pre-Approval
Assuming the lender is happy with your information you will receive your pre-approval. This pre-approval is usually valid for up to 90 days but this can vary between lenders. Remember- This is not an unconditional approval. There is never a guarantee that by obtaining a pre approval you will be Fully approved for a home loan. Once you find a property there will be additional requirements to be fulfilled for the loan to move to Unconditionally approved. Some lenders will provide you with a list of conditions which would need to be met.
A pre approval is only valid based on the information you provide. Always remember that if you do things such as change jobs, reduce income or take out a new credit card your application would need to be re-assessed. The Pre approval is granted based on the information given at application. Any changes can void this.
Once you find a property, place an offer on the house and it is accepted you will then apply for your full or unconditional 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.
If you would like to make a time to meet and discuss a pre approval for yourself please contact us today!
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