What does pre-approval really mean?



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April 30, 2011

It’s easy to have your home loan pre-approved, but it doesn’t necessarily mean your lender will part with the funds at crunch time. There are dozens of lenders offering so-called online loan approval in 60 seconds, but it’s not until your application is assessed for risk by a live action human being that you’re in the clear.

The bank will also want to send in a valuer to make sure you’re not paying over market value. And you can guarantee this won’t happen in a minute or less.

Here are some tips to help you get through the nerve-racking window between pre-approval and real approval.

  • Proof of identification and income. Wage and salary earners will need two most recent payslips or proof of employment and income from your employer. Contractors will need details of their most recent contract and, if you’re self-employed, get ready for a lengthy process involving two years of tax returns, BAS statements for the past three months, and possibly financial statements from your accountant.
  • Make sure your paperwork backs up your claim that you really can service the repayments.
  • Waiting until you have full approval gives you better bargaining power when you approach a vendor. This will stand you in greater stead than someone waiting on getting their finance sorted.
  • Your lender will usually keep your approval valid for three to 12 months.
  • If your lender is dragging the chain, shop around. Deregulation of this industry means the marketplace is extremely competitive.

 

 

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