What is Home Loan Pre-Approval?
Sometimes referred to as indicative approval or approval in principle (AIP), a home loan pre-approval is an essential part of the home loan application process. A pre-approval is simply an indication of how likely a lender will approve you for a home loan. It’s generally an offer from a lender based on a borrower's financial situation. A pre-approval is essential to borrowers wanting to confidently bid at an auction and make offers on a property.
How to Apply for Pre-Approval?
To apply for a pre-approval, there are a number of different steps you need to take. Firstly, you want to shop around and compare rates to make sure you get the best deal, as a number of different lenders will offer different rates to different customers depending on their unique scenario.
Secondly, it is to complete a loan application and it will include listing your income, assets and liabilities, etc. The third is to provide supporting documentation to back up the information provided. The lender will use the documentation to assess your loan application and the documentation required is generally ID documents, as well as income documents such as payslips and tax returns. Some lenders will also require statements for all your existing and ongoing liabilities.
The next step is to make sure you have the necessary funds required to complete the purchase. This would need to cover the lender fees, stamp duty, and any other costs associated with the purchase of the property. Lender will assess your ability to repay the loan. Once this is confirmed they generally will issue the pre-approval.
Benefits of Pre-Approval
There are no costs to get a pre-approval from a lender. The most important thing is that you will be able to attend auctions and make offers on property comfortably knowing that you will be able to secure the finance if you win that property. A home loan pre-approval normally is valid for 90 days and can be extended once it expires.
What Happens Once You Have Pre-Approval?
Now that you know your price range and have your pre-approval, you're ready to look for the right property for the right price. And once you find a property that you like, you can confidently go and make an offer in line with the pre-approval.
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