Do You Need Loan Pre Approval to Buy Your First Home?
Buying your first home is a major milestone and we are often asked by clients if they really do need a loan pre approval for a home purchase? So, we thought we’d write this guide about exactly what a pre-approval is, how to get one and some key tips for first-time home buyers. Read on to learn everything you need to know about the home loan approval process. When you are ready to discuss home loans, book in for a chat to see how we can help you.
What Is Loan Pre Approval?
Loan pre approval is essentially a lender’s indication of how much they’re willing to lend you for a home purchase. It’s not a guarantee of a loan but a strong indication of your borrowing power based on your financial situation. Some people think it’s not needed because you are going to submit an application for a home loan approval eventually, so why do a “pre-approval”? This process is a formal assessment by a lender and often allows for a much faster formal approval right when you need it at the pointy end of your house purchase.
Why Is Loan Pre Approval Important For First-Home Buyers?
While not strictly necessary, loan pre approval offers several significant advantages for first-home buyers:
- Confidence in your budget: Knowing your borrowing capacity helps you focus your property search and avoid falling in love with a home you can’t afford.
- Stronger offers: Sellers are more likely to accept an offer from a pre-approved buyer as it demonstrates your financial capability and seriousness.
- Faster settlement: Having a pre-approved loan can streamline the settlement process, saving you time and potential stress.
- Guarantor or government grant: If you are planning to use either a Guarantor or one of the Government Schemes that are available, there are extra steps and requirements to meet. Often more time is needed than the 14 days finance standard clause in Queensland to meet these style of finance applications so, getting pre-approval before you start making property offers can give you peace of mind.
How To Get Loan Pre Approval
Getting a pre approval home loan involves providing a lender with financial information, including income, expenses, debts and assets. An expert mortgage broker can guide you through the process and help you compare lender and loan options to make the right decision for you. Selecting a lender and loan for pre-approval is a crucial step in getting the right home loan with the right features and terms for your financial situation.
How Long Does Pre Approval Take?
A common question for first-home buyers is how long the pre-approval process takes. The answer varies depending on a number of factors including the complexity of your financial situation. If your financial circumstances are straightforward, the process can be quicker. Self-employed individuals or those with complex income structures might require additional documentation. Lender workload can also influence the time it takes for your loan pre approval processing time.
Providing all necessary documentation upfront will ensure you have the best chance at the fastest pre-approval timeframes. Generally, we find pre-approval takes anywhere from several business days to several weeks. A mortgage broker can also assist in gathering the necessary information and streamlining the application to ensure a smooth process. They can also liaise with the lender on your behalf if there are any hold-ups.
It is important to note that loan pre approval is typically only valid for a specific period, usually between three and six months in Australia. If you need more time for your property search, you may need to apply for an extension.
Is Loan Pre Approval Right for You?
While loan pre approval offers clear benefits, it’s not mandatory. Ultimately, the decision depends on your personal circumstances and comfort level. If you’re unsure, consulting with a mortgage broker can provide valuable insights right for you. Get in touch with us to see how we can help you navigate the home buying process with ease and secure loan pre approval.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
