Delays in home loan approvals coupled with a competitive residential market has increased buyers’ fear of missing out on their dream home. Did you know that pre approvals may not help you secure a home loan? In fact, pre approvals aren’t always necessary if you are wanting to buy a property.
In this blog we explore this matter along with:
- The Difference Between a Standard & Fully-Assessed Pre-Approval
- What to Consider When Applying for a Pre Approval
- What is a Preliminary Assessment & how it can help you secure home loan finance
- How Ledge can put your mind at ease
Are pre-approvals required if you want to buy a property?
There are many news sources that have depicted the disappointment many families have gone through in the current state of an extremely competitive residential market. People are receiving pre-approvals on home loans but getting caught up in the delay when it comes to securing the formal approval after putting in an offer.
A pre approval isn’t always necessary if you want to buy a property. Although it does outline your borrowing capacity, unless it is fully assessed, it will do very little to speed up the application process.
Hence, it’s important you know what type of pre-approval you have received to ensure you avoid the disappointment of missing out on a home because your pre approval wasn’t fully assessed.
What is the difference between standard & fully-assessed pre-approvals?
A standard pre approval is one that is given, either on the spot by a bank manager, or generated by a system. It is where your borrowing capacity is determined by the information you have either verbally or physically made available.
On the spot pre approvals aren’t sent to the lenders credit department and hence are effectively worthless, apart from you having a rough idea on the amount you can borrow. This type of pre approval should be treated as an estimate on the amount you may be able to receive on your home loan.
If you have withheld any information, such as payments you make to any existing loans, annual salary, living expenses, etc. then the amount will be inaccurate.
On the other hand, a fully-assessed pre approval is where you sit down with the bank or your broker and complete the following:
- Signed application form
- Proof of income – such as, payslips, tax returns, etc.
- Proof of savings – such as bank statements
- Proof of current personal debts – such as existing home loans, credit cards, or other personal loans
- And of course identification documents – such as drivers license or passport
Once this information is collected it may take between 2 to 4 weeks for the credit department to fully assess your pre approval and provide details on your borrowing capacity.
Does this mean your home loan application will automatically be approved?
No. Receiving a fully assessed pre approval does not mean that you can find a house, put an offer in, and get approved straight away. You may even get declined. Why? There are many reasons including:
- You only received an on the spot or system generated pre approval without realising at the time
- You still need to acquire approval from your Loan Mortgage Insurer if your home loan amount is for more than 80%
- Your pre approval has expired – this typically occurs after 3 months
- The bank’s policy may have changed since you received your pre approval
- Interest rates have since changed
- There may have been changes in personal circumstances
What to consider when applying for a pre approval
When/if applying for a pre approval, it’s important you consider the following to ensure you protect your credit score:
- Avoid applying for on the spot and system generated home loan pre approvals
- Try to avoid receiving a fully assessed pre approval and then not using it. Normally valid for 90 days
- Don’t request multiple home loan pre approvals across different banks
What is a preliminary assessment & how it can help you secure home loan finance?
At Ledge, we can conduct what we call a ‘Preliminary Assessment’ on your behalf. This simply entails requesting certain information from you which we will then assess in house.
With our expertise and the fact that we deal with banks on a daily basis, we know what interest rates are being offered and the underlying fees. We also know what is required from a customer point of view, saving you time, money and stress having to approach multiple banks.
Once we complete a preliminary assessment we advise you on what your options are and your borrowing capacity and then go from there. This will give you more confidence and certainty to purchase your next property.
This preliminary assessment is obligation free.
Ledge: Making home loan finance easy
At Ledge, we have long-standing relationships with the big four and many boutique home loan lenders. We are going through the processes each and every day and hence know what lenders are picking up files quickly and turning them from application to approval within a matter of days.
With our Platinum Broker access, some banks are looking at our deals within 48 hours. Meaning we can put your mind at ease as we make home loan finance easy.
It doesn’t need to be, nor should it be, a difficult process for people to receive the finance they require to purchase their dream home and have their loan approved within a timely manner.
Additional benefits you receive when coming to Ledge
- In a hot market its most important you can confidently tell a real estate agent that you are a qualified buyer
- We will be able to assist you in becoming that qualified buyer
- We are happy to liaise with the real estate agent throughout the process to give them confidence
- It will separate you from all other interested parties
Final thoughts
The Perth property market is extremely competitive making it difficult for people and families to find and secure the purchase of their dream home.
At Ledge, we can make this process easier with our obligation free preliminary assessment for your home loan and providing you with details on your borrowing capacity.
We know what banks to approach for each individual’s requirements based on a number of factors, such as, existing loans, credit cards, living expenses, deposit amount, salary, and many more.
If this blog has sparked any questions, please contact your Ledge Finance Executive directly and we will advise you of the next steps to take.
