Home Loan pre-approval. Four simple steps
Ready to buy a property? You’ll need to show the seller you have enough money. For most people, this will mean getting a loan, and the first step to getting one is obtaining pre-approval for it.
Pre-approval – also known as conditional approval or approval in principle – is an indication from a lender as to how much you can borrow with particular lender. If you have pre-approval, vendors and agents know you’re serious about buying. Here are the steps you need to follow.
1.Gather your financial information
To get an idea of how much you can borrow, and therefore what you can afford to buy, you need to give the lender a comprehensive picture of your finances. This includes your income, assets, and your financial obligations such as existing debts and living expenses (including ongoing bills, entertainment, food and car expenses, etc).
You’ll need evidence of everything:
Pay slips for salaried people and tax returns for self-employed to proof your income.
Evidence of assets (i.e. Council Rates, bank statements, shares statements etc.)
Loan statements for existing loans as evidence of your current commitments.
Credit card statements showing your credit limit. If you already stick to a budget and have a regular savings history, you may want to provide bank statements to demonstrate this.
You can use all of this information to get an idea of how much you may be able to borrow.
2.Meet a Credit Adviser
Make an appointment to speak to Credit Adviser. Most will provide a list of what you need to bring with you, such as the evidence explained above and the required forms of ID.
At the appointment, Credit Adviser will use your information to conduct preliminary assessment and calculate an approximate borrowing figure. The Credit Adviser will match your financial situation and needs to the right loan amount and right type of the loan. He will also advise you on the right loan structure which will save you money over term of the loan.
3.Undergo a credit check
The lender will arrange for an independent credit bureau to perform a credit check on you. This may affect whether or not you can borrow money, and how much. We suggest you to order free copy of your credit report at www.mycreditfile.com.au before meeting Credit Adviser
4.Receive conditional approval
Assuming your credit rating and your financial situation allow you to borrow desirable loan amount, you’ll then receive a conditional approval advice from the lender. The pre-approval advice is usually valid for 90 days. This is an indication, not a guarantee, of the amount you can borrow.
Use this figure to work out how much you can spend on a property, considering the size of your deposit. Factor in expenses such as conveyancing fees, stamp duty and so on. Also consider that you may not be able to borrow as much as the conditional approval advice indicates.
Securing pre-approval will allow you to house hunt with confidence.
What happens next
Once you’ve put in an offer on a house – whether at auction or a private sale – you’ll need to get full (formal) approval on a loan. Contact your Credit Adviser with details of the property, and they’ll work through the home loan application process with you.
Obtaining pre-approval for your loan is an important part of the home-buying process. Contact our Credit Adviser today for help with finding out how much you can borrow.