Everything You Need To Know About Finance Pre-approval

What is Finance Pre-approval?

Securing pre-approved finance ensures that when you find your dream home or land you are able to buy it. Think of pre-approval as assurance from your lender that you should qualify for a given loan amount before you make any offers. This is different from the final approval from a lender which takes place after you have chosen a home and made an offer.


Why Get Pre-approved?

Bargaining power.

Buying your dream home can sometimes mean a flash in the pan opportunity. It is likely that if you have been searching for months for your perfect property so have many other people. You want to put an offer forward so you contact your mortgage broker or lender only to find out that they will not lend you the desired amount. In a competitive market, the fewer conditions your offer has the more likely you are to win in a bidding war. Knowing you have pre-approval gives you the confidence you will need when entering negotiations.


Obtaining pre-approval is a productive way to sit down with an expert and work through what you can realistically afford. Being aware of what you can afford before starting researching properties will save you the disappointment of thinking you can afford more than you can. It is worth keeping in mind that your pre-approval may need to be renewed every 3-4 months as your bank or lender needs to ensure your financial situation is up to date. Secondly, you save yourself time having to research and find different loan options each time you want to make an offer.

How to get Finance Pre-approval

The first thing you will need to investigate is whether you are eligible for a loan with a bank, credit union or financial institution. This is easy as picking up the phone and setting some appointments. Every lender will have their own criteria. Australian Law requires that to be eligible for a loan you must be over 18, be an Australian Citizen or permanent resident and have evidence of genuine savings. Often you will be required to build a case of your financial position and ability to make mortgage payments. Lenders will want to see a healthy credit history and evidence of current gainful employment or income.

Impaired credit or unstable income can make securing a loan difficult. Total honesty is your best chance to secure pre-approval. ‘Missed’ credit that many people overlook can include loans you are still paying off, unpaid bills and additional credit cards.

Lenders will quickly be able to give you an indication based on your situation how much you can borrow. Lenders are required to be transparent about what your payments will be, how much you are eligible to borrow, deposit amount and any additional fees.

Once you have reviewed your finances and assessed whether you are eligible, you should also consider what type of loan you want. Discuss with your lender whether a fixed or variable loan would be best for your situation.

Always keep in mind that pre-approval is not a guarantee from the lender. It is simply a way of the lender indicating they are likely to approve a certain amount given all circumstances remain the same. The lender’s situation or yours could change in the time between pre-approval and actual approval.

As a first step to investigate your eligibility try a Calculator such as Beyond Bank’s ‘How much can I borrow’ – which will give you an indication of what kind of loans, repayments and amounts ‘may be available to you.



If you would like to find out more information about the home buying process call us on (08) 8132 1115 to get in touch with one of our sales consultants.


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