Home Loan Pre-approval

What is home loan pre-approval?

 

Simply explained, a home loan pre-approval is an indicative offer from the lender to provide a loan for a specific amount. This is usually provided for large purchases such as property where the buyer wants to know how much finance a lender will provide for them to bid. 

 

How do I apply for home loan pre-approval?

To apply for pre-approval, there are a number of steps a borrower must undertake in order to be approved.

 

1. Initial Consultation with us. We will understand what you want to achieve and a consider your circumstances to provide you the most appropriate solution. It's important to know that each lender assess differently hence why its good to leverage us.

2. Complete an application. We will generally to get details on your income, assets and liabilities. We gather these details from you electronically so its even more convenient. You will need to also include supporting documents.

 

Generally this will be;

- 2 most recent payslips

- Passports, Drivers licence or Birth certificate. 

- Most recent PAYG summary or group certificate.

- Statements of Credit cards or any other personal, car or home loans you may have. 

However this can change from time to time and based on what lenders require. 

3. We shop on your behalf. A Circle Finance loan specialist will start the shopping around and compare loans that are suitable for your situation. We will present options to you that will fit your needs. 

4. Provide proof of funds. Once a lender is chosen, we will need to gather documents which support your application which can be recent bank, term deposit, equity, shares statements, or a gift letter from family. The following needs to be displayed on the document for it be acceptable to the lender.

  • Your name, or the name of an immediate family member

  • The funds available

  • A recent date, no older than 4 weeks

5. Qualify your savings. At this stage we will need to check that your lender considers your funds as savings. Its important to know that unlisted savings like cash in a draw does not qualify for savings. We can guide you here if you are unsure. 

 

6. Ability to complete the purchase. We need to make sure that you have the necessary funds to cover the initial costs of lender fees, stamp duty and the deposit in order to complete the purchase. We will provide an estimate of these costs based on the amount of the loan. 

7. Lender Pre-approval submission. Your chosen lender will assess your capability to pay back the loan. If all goes to plan, they will then grant pre-approval.

 

What are the benefits of home loan pre-approval?

 

There are a number of benefits to getting home loan pre-approval before you begin your property search. Some of them include:

  • There is no cost to be pre-approved by your lender

  • It gives you an idea of how much you could potentially borrow

  • The offer is valid for up to 3 - 6 months (you can extend the pre-approval at the end of the term, simply talk to us)

  • You’ll be able to attend auctions comfortably, knowing what you can and can’t afford

  • Vendors can sometimes favour buyers who are pre-approved and ready to purchase because they can potentially settle sooner

 

What home loan pre-approval conditions I should be aware of?

 

Before you are granted home loan pre-approval, you will need to consider the following:

  • All of the information in your application must be correct and accurate

  • You will need to supply a number of documents with your application including ID verification, recent payslips, most recent group certificate/PAYG summary and recent loan statements for any existing loans

  • Lenders Mortgage Insurance (LMI) should be discussed with us and decided if appropriate for your case

  • There is a designated amount of time your pre-approval will be valid for (usually 90 days), so take this into account if you are not planning on buying soon.

 

Can home loan pre-approval be withdrawn?

 

Sometimes lending policies change, which might render your pre-approval application invalid. Keep yourself informed of your lender’s current rates and policies in order to stay on top of your home loan application process, as lenders will not inform you unless asked.

 

Is there a possibility my pre-approval could be rejected?

 

Just like any home loan, there is a possibility that a pre-approved home loan may also be rejected. Here are a few reasons why:

  • Your income documentation was poor/was not proved properly

  • You have a bad credit history

  • If your loan amount exceeds 95% of the property’s value

  • There may be a sudden policy change with your lender

  • If your lifestyle or financial circumstances suddenly change

 

I am pre-approved, what next?

 

Now that you’re pre-approved you can start your property hunt. You can now bid at auctions knowing what you can and cannot afford.

Remember, if you haven’t found the perfect property in 90 days you can extend your pre-approval period at no extra cost. You can do this by contacting us

I’ve found a property, what now?

 

Once you’ve made an offer on a property and it has been accepted, let your us know and we'll get the process motion to finalise your home loan.

  • We will instruct your lender to conduct a valuation of the property.

  • Your conveyancer or solicitor will arrange building and pest inspections for your property.

  • You will need to send a copy of your contract of sale to us.

 

While this can be a stressful time for many home buyers, we are here to do the heavy lifting for you and deal with the lender directly and guide your home loan to settlement.

 

Can I extend my pre-approval?

 

Yes, you can. The designated amount of time pre-approval is valid typically varies between 3-6 months, but if you haven’t found the right property in that time you can extend your pre-approval term.

The good news is that since you have recently (3 - 6 months ago) provided all of your financial information, you can extend this period without re-doing the entire process. However, if you let it expire, you’ll need to apply for pre-approval all over again.

 

How do I extend my home loan pre-approval?

 

It's easy and free to extend your pre-approval. Simply contact your us before your pre-approval expires.

Your extension can be completed quickly and it means that you won’t need to go through the application process again. In some instances, it may require a reassessment of some aspects of your financial position.