When you are in the market to buy your dream home, it helps to understand how much you might be eligible to borrow and narrow down your search accordingly. By getting pre-approved for a mortgage, you can get a fair idea of how much a lender is willing to lend to you. Besides helping you manage your expectations better, a mortgage pre-approval also puts you in a better position to negotiate with sellers and bid with more confidence at an auction.
If you plan to buy a property, applying for a mortgage pre-approval is not compulsory, but it can make your journey smoother in some ways. In this post, you’d find information on how mortgage pre-approvals work, why it is beneficial to get pre-approved for a mortgage and how to get mortgage pre-approval for your new home.
How Does A Mortgage Pre-Approval Work?
A pre-approval is a preliminary step in your mortgage application process. It means that a lender has agreed, in principle, to lend you a specific amount of money for purchasing your home. However, a pre-approval is not a guarantee that your home loan would be approved. It’s just an indication that your application generally fits with the lender’s borrowing criteria.
That being said, a lender will usually assess your personal details, like your income and expenses, before granting pre-approval, which can increase the likelihood of your mortgage application going through at a later stage unless there’s a change in your circumstances or financial condition.
Who Should Get A Pre-Approval?
A mortgage pre-approval is not mandatory before buying a home, but it can help you expedite the home buying process. For instance, you may like a property and make an offer to purchase it. However, when you apply for a home loan, you might find that you perhaps qualify for a lower amount. By getting pre-approved for a mortgage before making an offer, you’d have a fair idea of the deal that’s likely to go through so that you can negotiate a price accordingly or bid at an auction confidently.
There are two types of mortgage pre-approval, and you need to provide personal details like your income, expenses, assets and debts for both.
One option is getting an online pre-approval that can be secured instantly or within a few hours. If you choose this option, you’d be typically required to submit the application and supporting documents online to get an estimate of the amount you can borrow. However, such system-generated pre-approvals are mostly conditional on the information provided in your initial application. Some may not even involve a credit check, which means things can change significantly when a full assessment is carried out at a later date.
Alternately, you can request a lender for a full assessment that will include a thorough document review and credit check. This might take a few days, and the lender’s credit check will leave an inquiry on your file. However, if you get pre-approved after a full assessment, getting final approval on your mortgage is usually simple. You only have to confirm that your financial situation hasn’t changed, and the lender should not have issues with your home’s valuation.
Benefits Of Getting Pre-Approved For A Mortgage
- A mortgage pre-approval gives you a fair estimate of your budget.
- A pre-approval shows sellers that you are a serious buyer and in a likely position to provide the funds for closing the sale.
- When you provide your personal and financial documents for pre-approval, it helps streamline your final home loan application as you already have most of your paperwork in order.
- With a pre-approval, you can bid more confidently at auctions with a better idea of your risks and limits.
How To Get A Mortgage Pre-Approval?
Applying for a home loan pre-approval is obligation-free and costs you nothing. All you have to do is compare home loans online, contact a lender directly or connect with a mortgage broker to find a suitable lender and apply for pre-approval. To kickstart the process, you’d be required to furnish some personal details, like proofs of income, expenses, assets and existing debts. The lender will also carry out a comprehensive credit check, and it helps to check your credit score and go through your credit file before applying for a mortgage pre-approval. Some lender websites may also offer instant system-generated pre-approvals that don’t require a credit check, but these are mostly conditional.
Typically, your home loan pre-approval is valid for up to 90 days. If you haven’t found the right property during this time, you can always walk away without any obligation to take out a home loan. However, if you are continuing with your search, or have been unable to meet some home loan conditions, you may choose to seek an extension or have your situation reassessed.
Here’s How We Can Help!
At Wealthy You, we have an extensive network of lenders to help you narrow down your choices to lenders that are a better fit for your needs and financial situation. Besides, owing to our extensive experience with Sydney home loans, we understand the home loan application process well. This means we can guide you through the application process better and reduce the time and effort in getting a pre-approval for you.
If you are considering a property purchase, you can check up with us for a home loan pre-approval. Unlike the instant approvals available on some lenders’ sites, we help you secure a formal loan pre-approval based on a thorough assessment so that you shop around with confidence.
Of course, it is vital to bear in mind that a mortgage pre-approval does not mean you will be automatically approved for a home loan. Ultimately, the approval of your mortgage will depend on your financial status closer to settlement. That’s why we hold your hand throughout to help you maintain your finances and minimise the chances of your mortgage application getting derailed.
Chat with us online or call us directly (02) 7900-3288 to start your pre-qualification process in a few easy steps.