Sam: What does it really mean to be pre-approved for a home loan and how can you get one?
Hey guys, it's Sam from Lendi, Australia's number one online home loan platform.
We've helped thousands of Australians get pre-approved and purchase a property confidently
knowing that their finance will go through.
Watch this video where we'll explain what a pre-approval is, how are you going to get
getting pre-approved, and why a pre-approval is essential before you start bidding or making
offers on property.
Sam: Now, before we start, if you want great tips for home loans in Australia, make sure
you subscribe to our channel and hit the bell so that you can get notified when we post
new videos.
What is a home loan pre-approval?
Sometimes referred to as an indicative approval or an approval in principle, a home loan pre-approval
is an essential part of the home loan process.
A pre-approval is simply an indication of how likely a lender is to approve you on your
unique scenario.
Sam: It's an offer from a lender based on a specific purchase price, higher loan amount,
including the deposit and all costs associated with the purchase.
A pre-approval is essential to borrowers wanting to confidently bid at an auction and make
offers on property.
How do you apply it for a 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 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.
The second step is to complete an application.
These days, this can be done online and will include listing your income, assets and liabilities.
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, such as a driver's license, passport, as well as income
documents such as payslips and tax returns, and some lenders will also require statements
for all of your existing and ongoing liabilities.
Sam: You'll also need to provide the lender with proof of the funds you're contributing
towards the purchase.
For example, it could be saving statements or a gift letter, if you're receiving a gift
from a family member.
For more information on the supporting documents required, check out our video in the link
above.
Certain lenders will have different considerations for different types of funds being used towards
the purchase.
For instance, some lenders require what's called genuine savings, which proves the borrower's
ability to save over a period of time.
This is genuinely required for LVR's that a greater than 80%.
Remember to speak to a home loan specialist to make sure that your savings or funds qualify.
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 moving costs, and any other costs
associated with the purchase of the property.
Sam: For more information on the hidden costs of home loans, check out our video in the
link above.
Lastly, your lender will assess your ability to repay the loan.
Once this is confirmed, they'll issue the pre-approval.
What are the benefits of a preapproval?
There are a number of different benefits to getting a home loan pre-approval before you
start your search.
There is no costs to get a pre-approval by a lender.
It also gives you a good idea of your maximum purchase price.
The last thing and most important thing is you'll be able to attend auctions and make
offers on property comfortably knowing that you'll be able to secure the finance if you
win that property.
Vendors and agents would generally favor purchases who can prove their finance and show that
they're in a position to settle on the loan quicker.
Sam: What are the conditions that you need to be aware of?
Before you're granted a pre-approval, you need to consider does the lender have all
the information they need to make a full assessment on the loan?
And all of the information in the loan application must be correct and accurate.
Be aware that some lenders will issue an auto pre-approval solely based on the data that's
submitted with the loan application and it hasn't been manually assessed by a credit
assessor.
This can be a risk as once it finally gets to a credit assessor, certain details of the
loan application could be considered differently, such as how the income is calculated and if
you're using a specific type of overtime or allowance towards the service ability.
It's always important to know if there are any specific risks with your home loan scenario
so that you can work through this with your home loan specialist and it can be mitigated
with the lender prior to the loan approval.
Sam: A home loan pre-approval would generally last for 90 days, however, it can be extended
once it expires.
Take this into account if you're not planning on buying in the next 90 days, as it will
be another inquiry on your credit file if you need to extend your pre-approval.
For more information on credit scores and how that can impact your borrowing capability,
check out the video in the link above.
Can a home loan pre-approval be withdrawn?
The short answer is yes, as sometimes the lending criteria changes, which might render
your pre-approval invalid.
It's really important to work with your home loan specialist so that you can be informed
if your lender does change any details.
Is there a possibility that my pre-approval could be rejected?
Just like any home loan, yes, your pre-approval can be rejected or declined.
And here's a few reasons why.
Your income level isn't sufficient to borrow the amount that you need to complete the purchase.
Sam: You've got a bad credit history or you don't have enough funds to put towards the
purchase.
And finally, if your lifestyle or financial circumstances suddenly change.
What happens once you get the pre-approval?
Now that you're pre-approved, you can start the property hunt.
And once you find a property that you like, you can confidently go and make an offer in
line with the pre-approval.
Remember, if the 90 days is up and your pre-approval does expire, you can extend this for no extra
cost.
Sam: That's it guys.
Everything you need to know about a home loan pre-approval.
If you're looking at getting a home loan and want to check out how easy the pre-approval
process can be, jump onto lendi.com.au.
Our online home loan platform will allow you to compare rates and products, upload everything
online at your own pace 24/7 and you won't have to visit a bank branch.
Now, if you're looking for more great tips on home loans, you can also join our home
loan hacks Australia Facebook group where we answer any questions and talk all things
home loans.
If you found this video helpful, give us a thumbs up, add any questions you have in the
comment section below.
Finally, if you want more information on relevant home loan topics, check out our videos here.
See you next time.