For almost every person who wants to buy a home, you will need a home loan. You’re reading this at Real Simple Home Loans, and it’s part of our job, to help you get a home loan and get you into your perfect home.
But you don’t need a loan until you have a home, or else you will be paying off a debt for something you don’t have. What you do need is a bank to say they will loan you the money when you need it.
We’ll tell you how to get pre-approved for a home loan, how long it will take and more. Read on!
What is home loan pre-approval?
Home loan pre-approval can be called many things- pre-conditional loan, conditional approval. What it is, is an in-principal agreement from a lending institution that they will loan you an amount of money to buy a property, subject to certain conditions, of course.
How does the pre-approval process work?
Getting pre-approval for a home loan is basically the same as applying for the actual loan. Lenders will want to know about your financial situation, employment situation and more.
- Documentary evidence of your employment and current salary.
- Evidence of your bank balance and ability to save.
- Documentation about any debts or liabilities, as well as assets.
- Demonstrated evidence of your budgeting and spending habits.
What are the benefits of mortgage pre-approval?
One of the biggest benefits of pre-approval is knowing you have it. You can search for homes with confidence, knowing you have the money to buy.
It also gives you a stronger position when making an offer on a house. You don’t need to have – subject to finance, in your offer.
It also gives you the confidence that you CAN do this. The banks, who are very removed from the process, believe you can do it too.
Do I need conditional approval?
To buy a house, no, you don’t need pre-approval. However, when making an offer on a house, you must make it one of the stated conditions.
Additionally, agents like to show a house to someone with pre-approval, as it shows intent and it shows you are capable of buying.
Should I always get pre-approval when applying for a home loan?
Again, you don’t have to get pre-approval, but it certainly strengthens your bargaining power, and it can give you the reassurance that you can service a loan, as the banks believe you can.
It takes away the pressure that when you find a house, you need to get finance. You can quickly and easily sign on the dotted line, especially at an auction.
Does pre-approval mean I will definitely get a home loan?
No, this pre-approval doesn’t guarantee a home loan. There can be a time gap between pre-approval and when you get the loan. Terms and conditions of the home loan, even your ability to service a loan, may have changed.
A lender will do a check, again, before actually giving you the loan. If your job situation has changed, or if there have been negative issues with your credit score, for example, then you may get denied your actual loan.
But don’t worry. Just because you were denied the loan at this time, doesn’t mean you won’t get approval again. One knockback does not seal your fate.
What happens after I’m granted a pre-approval?
Generally, you are pre-approved for your loan amount for 3 months. After that, they reassess, and if everything is going well, you have another 3 months of pre-approval.
At 6 months, you need to apply again. This means updating your salary information, your budget and spending information, and so on.
In the meantime, now that you’re pre-approved, you can shop for a house with confidence.
Want to know more?
We have a wealth of information and articles for you to read about home loans for first-home buyers, or if you need to refinance your home loan. Contact us if you have any questions, or want to start your way towards owning your new home.