For many buyers, purchasing a home involves some compromise between the kind of home they want and the home loan they can get. You could’ve found a great property in a neighbourhood perfect for your family, but the bank won’t lend you the amount you need to buy the house. Such a situation can be doubly frustrating given the efforts you’d have made to find a suitable home.
If you get pre-approved for a home loan, you may avoid this disappointment, as you may get an idea about how much you can borrow and the conditions you need to meet. A formal pre-approval often requires signing an agreement with the lender which has details of the home loan product you’re pre-approved for as well as any conditions that you need to fulfil before you submit the home loan application. This agreement may also mention any further checks required, such as verifying the valuation of your home, before your home loan is fully approved.
When to get pre-approved for a home loan
A home loan pre-approval can be useful in several scenarios, not least in helping you understand your financial situation from a lender’s perspective. For instance, you may be worried that lenders may rate your income insufficient for a loan, or that your credit score isn’t high enough. Discussing a potential home loan application with actual lenders can certainly help ease some of these concerns. Again, knowing the amount you can borrow can help you plan your savings, both for the deposit you need to pay if you apply for and get your home loan approved and for the repayments.
Depending on your circumstance, you can opt for either a system-generated pre-approval or a full assessment. A system-generated pre-approval involves submitting the application and the required supporting documents online and getting a quick estimate of the loan amount you can apply for, with some lenders even offering instant estimates. While you can get pre-approved for a home loan online, the estimates are usually conditional and cannot be considered reliable. In some cases, these pre-approvals may not involve a credit check at all, which means that the estimate could change drastically when a full assessment is conducted.
The best way to get pre-approved for a home loan may be requesting a full assessment, in which the lender thoroughly reviews your application and also takes your consent for a credit check. Again, they may ask you for clarifications or further documents if needed. If you get pre-approved for a home loan after a full assessment, you’ll only need to confirm later that your financial situation has not changed, and that the lender has no concerns about your home’s valuation. Remember that you’ll need to apply for the home loan before the pre-approval expires.
Where can I get pre-approved for a home loan?
Can you get pre-approved for a home loan online? Yes, you can. While the internet may not always be the best place to get pre-approved for a home loan, you can apply for pre-approval online, and also by calling or visiting a lender. You may only get a system-generated pre-approval when applying over the internet or phone, which may not be useful. For a full assessment, consider meeting a lender in person, which may help the lender confirm that you are indeed serious about applying for the home loan. You should also think about assessing your financial situation before approaching a lender, perhaps by using a calculator to estimate how much you can borrow.
If you aren’t sure about which lender to approach, you can consult a mortgage broker who can help you identify the right lender and act as an intermediary to ease the pre-approval and application process. If you need more time and are worried about your pre-approval expiring, mortgage brokers can also get your pre-approval duration extended.
How long is a home loan pre-approval good for?
While getting a pre-approval may take a matter of hours or days depending on the lender and your circumstances, the pre-approval may be valid for between three months and six months. Consider checking with the lender whether this duration is inclusive of the home loan application processing time, which can take as much as a month and a half. Ideally, this should be sufficient time for you to find a property of your choice, if you already haven’t shortlisted a few options. You may also need this time to clear any hurdles that the lender may have highlighted when reviewing your home loan application.
If you haven’t found the right property, or aren’t able to meet other home loan conditions within this timespan, you may be able to request an extension. However, lenders may only agree to an extension if there are no changes in your application or financial situation. Again, a pre-approval is not mandatory, and you can apply for a home loan even without it. If you are waiting for a promotion, an inheritance or a gift before applying for the home loan, you may want to apply for the pre-approval after that comes through.