Mortgage pre-approval means a lender is willing to lend you money and has pre-made some home loan offers for you based on your current financial situation (income, debts, credit score).
As a borrower, it helps you get an idea of what kinds of loans you could get, what your limits are, and how the entire home loan market works if you’ve never had a home loan before. If you’re someone in the home-buying process, pre-approvals will come in handy as they tell you what you could be eligible for in the market.
We’ll explore home loan pre-approvals in more detail here so you can understand what they are, how to get pre-approved, and more.
Getting pre-approved for a home loan means a lender checks your current financial situation (income, debts, credit score) and is willing to lend you money. As part of this process, they’ll tailor some offers based on your financial situation to give you an idea of the loans you could benefit from.
Let’s look at the benefits of getting pre-approved for a home loan:
Gives you an idea of your borrowing limits, helping you search for property with a budget you can possibly work with.
Faster closing time for the actual loan since your financials may already be reviewed.
Better negotiation power since you know your limits with the pre-approval in hand.
Mortgage pre-approvals are a great way to enter the home loan market. You’ll be more confident in the house-hunting process if you’re pre-approved for a home loan, as they equip you with info related to your eligibility and limits.
However, it’s important to note that pre-approvals do not automatically qualify you for a home loan. They do not guarantee finance and are not equivalent to loan approval.
The sole purpose of pre-approvals is to give you an idea of the loan products and limits you may qualify for, subject to change based on further assessments by the lender.
These two terms are often used interchangeably, but there are key differences.
The main differences being:
How in-depth the lenders go to review your finances.
And how strong of an estimate of your eligibility and limits they yield.
A mortgage pre-qualification is a quick estimate of how much you can borrow. Although you’ll usually provide basic financial info, like your income and debts, there are no formal verification processes involved.
And you can likely get an estimate in 5 minutes if you call up a lender on the phone.
Pre-approvals are more valuable as they’re more in-depth and formal. The lender reviews and verifies your financials here (with documentation of income, assets, and liabilities) and even does a soft inquiry on your credit, which shows up on your credit report.
They give you more accurate estimates. And since the pre-approved offers are made after a thorough verification process, they hold more weight with lenders and are closer to an actual loan approval.
You can always approach a lender offline and ask them for a pre-approved offer.
However, online mortgage pre-approvals are convenient, faster, and allow you to compare different lenders to find the one that best suits you.
Here at Koalify, we make the entire process of getting a home loan as easy as possible. If you’re looking to get pre-approved mortgage offers, get in touch with us, and we’ll take you through the best possible lenders you can apply for a pre-approval.
Our network includes the best 30+ lenders in Australia. Just share your basic info with us, and we’ll get the pre-approved offers rolling to your inbox.
It’s convenient, fast, and guarantees the best possible offers. Contact us today to start!
The time it takes to fully process a pre-approval request depends on the lender, but most lenders will reach back to you with offers in 1-3 days.
In some cases, this could take up to a week or even longer than that. Certain delays happen when:
You submit incomplete documents.
Your finances are complex (multiple sources of income, self-employed, or have existing debt).
Pre-approvals usually have a validity of 90 days or three months, but they may vary between lenders. Once they expire, you’ll have to apply for a new one.
For a mortgage pre-approval, lenders usually require you to have a healthy credit score, a good debt-to-income ratio, stable income, employment verification, etc.
To increase your chances of getting pre-approved and to get the best possible pre-approved offers, you should:
Make sure you have a healthy credit score before applying. The credit score threshold varies by lender.
Pay down debts to improve your debt-to-income ratio before applying.
Make sure you have a stable income and employment history.
The short answer is yes. But it’s not advisable.
Every time you apply for pre-approval, the lender will do a soft inquiry on your credit, which may affect your credit score.
Lenders regard multiple inquiries in a short period as risky, as it suggests:
You may be short on cash.
You’re getting ready to take a lot of debt without careful consideration or management.
Since they both hint you as a risky customer, lenders may reject your pre-approval request.
Getting a pre-approved mortgage offer means you can use it to guide your house search. Now that you have a basic idea of what you could get, it’ll help you search for houses that fit your budget.
Once you’re fully confident about getting the home loan, you can approach the lender with the pre-approval they offered you. You can use it to negotiate the best of terms with them.
Pre-approved mortgage offers give you a fairly accurate estimate of what kinds of home loans you could get and how much you may be eligible for.
It is of great significance since it helps you with the house-hunting process. Because you now have an estimated budget you can work with.
If you’re ready to get a home loan, Koalify can help you with the best possible offers from 30+ top lenders in Australia.
Ready to get your personalised pre-approved offer? Contact us today!
Let our home loan experts secure the most suitable deal for you
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