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  • Writer's pictureJosh Cameron

3 ways pre-approval can give buyers an edge


There’s a lot to be said for having your home loan pre-approved. But does pre-approval mean you’re putting the cart before the horse? Definitely not. Here are three ways pre-approval can help you get ahead of the competition.


Here’s a handy tip: you don’t have to wait until you’ve found a home you’d like to buy before making mortgage enquiries with a lender.


It’s possible to have a home loan pre-approved before you’ve even started to wear out shoe leather at open home inspections.


It can mean you’re ready to go with your loan, with only a few formalities to sort out, as soon as you’ve found the right place.


Even better, pre-approval doesn’t mean you’re committed to taking out a loan. It’s not a problem if you have a change of plans.


Here are three ways home loan pre-approval can put you in front in today’s market.


1. Pre-approval gives you a budget to stick to


When it comes to a major step like buying a home, there’s no room for guesswork.


With a pre-approved home loan, you know exactly how much you can borrow, and that’s the foundation for your home-buying budget.


It means you can focus on homes within your price range, and make an offer with confidence.


Pre-approval is especially important if you plan to bid at auction. It sets a clear line in the sand for your highest bid.


2. You can act fast


In today’s market, homes are selling in turbo-charged timeframes.


Figures from CoreLogic show the median selling time across our capital cities is just 27 days. That’s less than a month!


So you need to act fast to avoid missing out. Sellers might not wait around while you head to the bank to see if you qualify for a home loan.


Having pre-approval in place means you can get the ball rolling as soon as you find the right home, without getting pipped by a more organised buyer.


3. Pre-approval can show you’re a serious buyer


Nothing says ‘genuine buyer’ like home loan pre-approval.


Don’t be shy about letting real estate agents know your loan is pre-approved. It adds clout to your negotiations and gives vendors confidence that you have the finance to follow up any offer you make.


Just consider keeping some information up your sleeve, such as how much you’ve been pre-approved for.


After all, the real estate agent’s goal is to get the best price for the vendor, not the buyer!


How reliable is pre-approval?


Home loan pre-approval is not a guarantee that you’ll get a home loan.


You won’t get the green light for sure until you’ve found a place to buy, and the bank has checked that the property meets their lending criteria.


Your lender will also want to see that your personal finances haven’t changed since your loan was pre-approved.


It’s also worth keeping in mind that while there aren’t many downsides to obtaining a single pre-approval, getting too many over a short period of time with multiple lenders can potentially negatively impact your credit score and ability to take out a loan – as lenders might suspect you’re financially unstable.


Which pre-approval is better?


Home buyers are often surprised to learn that pre-approval isn’t available with every lender.


Even among banks that do offer this service, not all pre-approvals work the same. One sort is especially worth aiming for.


You may come across two types of pre-approvals:


1. System-generated pre-approvals


This sort of pre-approval is generated by a lender’s computer based on the information you enter about yourself.

You can get a result quickly this way. The catch is that the analysis isn’t thorough, making the outcome unreliable.


In particular, if any of the details you enter are incorrect, the bank’s IT system may wrongly say you don’t qualify for a home loan.


2. Fully assessed pre-approvals


As the name suggests, this type of pre-approval involves your bank’s credit team taking a close look at your finances, credit score and other personal and financial details to be sure you can comfortably manage a home loan.


A full assessment takes more time, but it’s worth the wait. It can help you feel more confident that you’ll be offered a home loan when you find your ideal property.


Want to find out more about pre-approval?


If you’re looking to buy a home and want to get an edge over the competition (to put in an early offer, for example), then pre-approval might be a much-needed ace up your sleeve.


We can help you work out which lender and which loan product is a good fit for your pre-approval situation.


So call us today to take the guesswork out of home loan pre-approval, and give yourself a head start over other buyers in the market.


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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