You Have Pre-Approval, Now What?

Getting pre-approval is a major step in the home buying process as it outlines how much you can borrow; which tells you how you can spend.

It is also the last step you need to take before making an offer towards a piece of sweet property.

But can pre-approval often leaves people with so many questions. Here we look at what it means to have your loan pre-approved.

What do you do after you receive pre-approval?

Once you have you loan pre-approved, the next step is generally ramping up your property search. Pre-approval means you can start making offers, so it’s time to get serious and attend open inspections and auctions.

Pre-approval will often be required when making an offer via an auction. This is because if you win you’ll need to go through with the purchase – regardless of whether you have a loan! Pre-approval shows you have your finances in check and you’re on your way to securing the final loan to pay for the property.

How long does pre-approval last?

It’s important to remember that pre-approval isn’t open-ended. The precise time period may vary, but it’s typically 90 days. After that, you’ll need to go through the pre-approval application process again.

Therefore, to prevent yourself from having to restart the application process, it pays to be organised. This way you’re prepared for things to move quite quickly after your pre-approval is secured.

You’ve made an offer, what now?

You’re armed with your pre-approval, you’ve made an offer on a property and it has been accepted! Congratulations, but it’s not over just yet! The next step is to submit a formal loan application.

As your pre-approval isn’t a guarantee for a loan, you’ll need to formally apply for your loan amount, which is a completely new process that generally takes a lot longer to secure.

If all goes according to plan, you can proceed with the property purchase and start signing contracts.

Are you guaranteed the amount you’ve been pre-approved for?

The short answer to this is no. Rather, pre-approval should be considered as an indication of your eligibility for a loan.

Once your offer is accepted by the vendor, you’ll still need to go through a formal approval where your lender will do a series of checks to ensure you’re in a good position for the loan amount you’re asking for.

Factors such as changes to the market, interest rates and your personal finances (for instances, whether you’ve been promoted or let go from your job) can affect your pre-approval.

While the type of property you’ve chosen generally won’t alter your loan amount significantly, it may if the property you’re looking to purchase is too small, in an undesirable area (in accordance to your lender) or too damaged.

Are there any drawbacks to pre-approval?

Pre-approval is largely recommended as it empowers you to negotiate a sale. It can also give the seller confidence in you as a buyer. In some cases, it’s required because a vendor will want to see you’re capable of proceeding with the sale before considering you as a candidate.

However, keep in mind that every time you apply for pre-approval, there will be an enquiry recorded on your financial record which can affect your credit score.