Preparing to Buy: The Advantage of
Pre Approvals
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If you're considering buying property, securing a pre-approval for financing can help ensure you’re ready to make an offer when you find the right place. A pre-approval confirms that you meet a lender’s requirements to borrow up to a certain amount, though it may be subject to further valuation and potentially Lenders Mortgage Insurance approval.
This process reduces much of the paperwork, removes uncertainty around your borrowing capacity, and allows you to focus on what’s most important—finding the ideal property.
Benefits of Getting a Pre-Approval
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No Obligation to Borrow the Full Amount: You’re not required to use the entire pre-approved amount, giving you flexibility in your final decision.
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Extended Validity: Pre-approvals are typically valid for 90 days, with some lenders offering the option to extend. This gives you up to 75 days to sign a contract, allowing time for property valuation and formal approval before the pre-approval period ends.
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Accelerates Final Approval: With a pre-approval, the final approval process is faster. Once you’ve signed a contract, the lender mainly needs a property valuation and any remaining conditions to be met.
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Increases Negotiation Power: Vendors appreciate buyers with pre-approval, as it demonstrates that you’re a serious buyer.
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Confidence in Budgeting: Knowing your borrowing capacity can help narrow your property search to fit your financial range.
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Less Stress: It can help alleviate some of the stress when you find a property by confirming that you’re likely to secure the financing.
How Much Should You Get Pre-Approved For?
It’s recommended to apply for the maximum amount you’re comfortable borrowing. You’re free to borrow less, but if you need more than the pre-approved amount, the assessment process may have to start again from scratch.
Is a Pre-Approval the Same as Unconditional Approval?
Not quite. For full, unconditional finance approval, the lender still requires a valuation to confirm that the property is acceptable security. You may also need to meet other conditions, such as a rental appraisal if purchasing an investment property.
When signing a contract, include a finance clause to allow time for the valuation and any other pre-approval conditions to be fulfilled before final approval is granted.
Your pre-approval also relies on your financial circumstances remaining stable.
What if Something Changes After Pre-Approval?
Pre-approval is granted based on the financial details provided at the time of application. Avoid making changes without discussing them first. Key things to avoid include:
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Taking on new credit (such as credit cards, car loans, or personal loans)
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Using funds intended for your deposit
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Changing jobs or altering your work conditions (like reducing hours or moving to contract-based employment)
If unexpected changes occur, contact us to understand any potential implications before signing a contract.
Are All Pre-Approvals the Same?
Not all pre-approvals are equal:
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Assessment Levels Vary: Some lenders may not fully review pre-approval applications, which can lead to unexpected issues later.
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Rate Fluctuations: Not all lenders lock in the assessment rate for the full 90-day period. If the rate isn’t held, your borrowing capacity could decrease if rates rise during that time.
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Lenders Mortgage Insurance: For loans needing Lenders Mortgage Insurance (LMI), some lenders pre-approve LMI, while others only apply for LMI approval once a contract is in place. This may lead to surprises if the LMI isn’t approved in advance.
At Fortifi Finance, we work closely with you to understand your needs and help select a lender that offers a pre-approval fitting your situation. If we use a lender without a full assessment, we’ll guide you through the potential risks.
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©2024 Fortifi Finance
info@fortifinance.com.au
0419 550 734
Disclaimer
This website has been prepared with all due diligence and care, based on the best available information at the time of last update. Fortifi Finance holds no responsibility for any errors or omissions within. Any decisions made by other parties based on this information are solely the responsibility of those parties. Capstone Mortgage Solutions Pty Ltd ACN: 665 796 234 is an authorised credit representative 547296 of Australian Finance Group Ltd ACN 066 385 822 (AFG) Australian Credit Licence 389087.




