What is Home Loan Pre-Approval and Should You Get It?

If you are thinking about buying a home, one of the smartest first steps you can take is getting a home loan pre-approval. But what exactly does that mean, and why is it important?

What is Pre-Approval?

Pre-approval is when a lender checks your financial details and confirms how much money they might be willing to lend you to buy a home. It is like getting a thumbs-up before you go shopping. The lender looks at your income, expenses, debts and savings. If everything checks out, they give you a letter saying you are approved to borrow up to a certain amount.

Why Get Pre-Approval?

1. Know Your Budget: With a pre-approval, you know exactly how much you can spend. This helps you avoid wasting time looking at homes outside your price range.

2. Stronger Negotiation Power: Sellers take you more seriously if you have pre-approval. It shows you are ready to buy and can act quickly.

3. Faster Buying Process: Pre-approval can speed up the buying process when you find the right home.

4. Confidence in Your Search: You will feel more confident knowing you have a lender backing you.

   
   

Is Pre-Approval a Guarantee?

Not all pre-approvals are the same. Some pre-approvals are only system generated by the lender and still need further discovery by the lender once you find a property. This are not a strong pre-approval as there may be missed information that the lenders system misses. There are then fully assessed pre-approvals. These pre-approvals have been assessed by the lenders credit team and are more thorough than a system generated. This are typically subject to you finding and property and that property being sufficient to the lender. These are more likely. Your broker will discuss with you which pre-approval to go for and give you a breakdown of the potential risks within that pre-approval. Getting a pre-approval still gives you a firm footing to confidently understand your financial position. What your loan size could be and what your maximum purchase price is.

Should You Get It?

If you are serious about buying a home in the next three to six months, then yes, getting pre-approval is a great idea. It helps you be more prepared and competitive in the market.

Ready to house hunt with confidence? Book a free meeting with one of our expert mortgage brokers today and get your home loan pre-approval sorted. Book Now