Ready to buy a property? For most people, this will mean getting a loan, an important and efficient first step in this process is obtaining pre-approval. If you have pre-approval, vendors and agents know that you are serious about buying. Securing pre-approval will allow you to house hunt with confidence.
Pre-approval, also known as conditional approval or approval in principle, is an indication from a lender as to how much you can borrow. Here are the steps you need to follow.
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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 and 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 and tax returns for your income.
- Loan statements for existing loans.
- 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.
- Bank statements to show evidence of your spending patterns and savings history.
You can use all of this information to get an idea of how much you may be able to borrow. There are a number of free mortgage tools and calculators that can help.
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Meet with an expert broker
Make an appointment to speak to an expert mortgage broker. One of our brokers will provide a clear list of what you need to bring with you, such as the evidence explained above and the required forms of ID.
At the appointment, your broker will use your information to calculate an approximate borrowing figure. If you want to proceed, you can fill in a pre-approval application form.
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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. If you are unsure of your credit rating, your broker can arrange for a credit check prior to lodging your application with a lender. A history of late payments or defaults can affect your ability to borrow money from a lender.
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Receive conditional approval
Once your lender has assessed your application and it meets the criteria set by the lender, you’ll then receive a conditional approval letter from the lender. The conditional approval is usually valid for 90 days. This is an indication, not a guarantee, of the amount you can borrow.
You can use this conditional approval to work out how much you can spend on a property, taking into account the size of your deposit. Factor in expenses such as conveyancing fees, stamp duty and so on. Also consider that your conditional approval letter may be subject to property valuation and other conditions, and therefore the final amount you are able to borrow may be affected.
What happens next
When you’re thinking of putting an offer on a house – contact your expert mortgage broker and they will work through the home loan application process with you.
Obtaining pre-approval for your loan is an important part of the home-buying process, one of our expert brokers will be able to assist you in finding out how much you can borrow. Book a free consult by calling (08) 9367 4222 or fill in the contact form on this page.