Day 17

A formal pre-approval is the bank conditionally approving your borrowing power given specific circumstances and conditions. The bank has assessed your situation as it stands now and indicated they will lend to you, for a property they approve, a certain amount if your situation is the same (or better) when you buy.

If you get preapproved to buy in the $800k range because you have $160k (20%) deposit but one of you loses your job before you buy a property (or you buy a car, have a kid, have a change in income, etc) the bank reserves the right to re-assess and either re-approve or withdraw your pre-approval.

A pre-approval is not a guarantee of anything.

A home loan pre-approval is provided by a lender in writing, confirming that subject to certain specified conditions being met, that you may be able to borrow up to a specified sum. This is also known as a ‘conditional offer’ of finance.

When you receive your pre-approval you should carefully check and ensure that you understand each of the conditions and what must be done to meet these. Standard conditions as an example are; Registered Valuation satisfactory to the bank, copy of the signed sale and purchase agreement satisfactory to the bank.

In order to obtain a strong pre-approval, you should provide as much information/documentation as necessary when submitting your application. The strongest pre-approvals usually result in a pre-approval with the least number of conditions attached.

A pre-approval is a lot of work, they expire within months, and do not help you avoid future checks into your situation later when you do find a property. Unless you are specifically looking to buy at auction and have the property identified already (with a copy of the sale and purchase agreement) then most of the time the pre-qualification of knowing your borrowing power will be sufficient.