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What does pre-approval really mean?

What does pre approval really mean?

30 Apr, 2011 - 2 min read

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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Disclaimer

This article is over two years old, last updated on April 30, 2011. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.

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Laine Gordon

Head of Public Relations

Laine Gordon is the Head of Public Relations at RateCity and an experienced journalist and research specialist. With a background in news and feature writing, covering finance, media and even food (a passion of hers) at Reed Elsevier publications, Laine brings almost two decades of experience to the team. Having covered major areas of interest to the general public from hip pocket issues to rising and falling interest rates and the impact to mortgages, credit and saving in Australia, she is passionate about researching and telling people’s stories to help others make better decisions about their own finances.