Confused about home loan preapprovals? Follow these 4 steps.

Ready to buy a property? You’ll need to show the seller you have enough money. For most people, this will mean getting a loan and the first step to getting one is obtaining preapproval for it.

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Preapproval – also known as conditional approval or approval in principle – is an indication from a lender as to how much you can borrow. If you have preapproval, vendors and agents know you’re serious about buying.

Here are the steps you need to follow.

1. Gather your financial information

To get an idea of how much you can borrow, and therefore what you can afford to buy, you need to give the lender a comprehensive picture of your finances. This includes your income and assets and your financial obligations such as existing debts and living expenses (including ongoing bills, entertainment, food and car expenses, etc).

You’ll need evidence of everything including such things as:

  • Pay slips and tax returns for your income.

  • Details of any existing debts which might include things like a car lease or personal loan.

  • Loan statements for existing loans (if you have one).

  • Credit card statements showing your credit limit and your behaviour in repaying any debt owing.

  • Statements showing your savings or deposit. If you already stick to a budget and have a regular savings history, this will work in your favour.

2. Meet a broker (like me!)

Make an appointment to speak to someone like myself. I will provide a list of what you need to bring with you and the required forms of ID.

We will complete together a form which will provide me with all the information I need to work out your maximum borrowing power (across a range of lenders).

We will then look at how much you can spend on a property based upon the size of your deposit and how much you can afford to repay each month. We need to make sure that what you can potentially borrow from the bank is actually affordable for you.

Once you are clear what you can borrow (and therefore what price range you should be considering) I will then advise you which bank and loan is best for you based upon your individual circumstances. Not all situations are the same.

3. Apply for your preapproval

We will then submit an application together with all your supporting documents to the bank to assess you. This can take anywhere up to 5 working days, depending on the bank. The lender will complete a credit check on you and assess everything we put forward to them.

I will look after the whole preapproval process for you.

4. Receive conditional approval

If the bank is happy with your loan application and your credit check is clear, you’ll then receive a conditional approval. This is as far as you can go at preapproval stage. Preapprovals are usually valid for 90 days. This is an indication, not a guarantee, of the amount you can borrow under the loan you have applied for.

Securing pre-approval will allow you to house hunt with confidence. It will also be a clear indication of what price range you can consider and how high you can bid knowing exactly how much money you will receive from the bank to settle on the property.

It is the best thing you can do if you actively looking at buying a property.

What happens next

Once you’ve put in an offer on a house – whether at auction or a private sale – we will need to convert your conditional, preapproval to a full, unconditional approval by submitting the contract of sale to the bank. They will complete a valuation and arrive at a final assessemtn.

It is my job to manage the home loan application for you - from start to finish.

Your first step however must be obtaining pre-approval for your loan.

Contact me to find out how much you can borrow.

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Bernadette Leahy holds a Diploma in Financial Service (Finance/Mortgage Broking Management) and is a

 MFAA Authorised Member.

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Bernadette Leahy is a Credit Representative (CR No: 399004)

of Buyers Choice Licencing ACN 626 172 281

(Australian Credit Licence No. 509484)

Mortgages, Home Loan