What is a Mortgage Pre-approval
A mortgage pre-approval is simply an agreement with the bank saying they have conditionally approved to loan you a specific amount of money. This is useful for when you are house shopping as you will then know what you can afford. Sometimes pre-approvals will have restrictions such as ‘house value’, for example, the bank may have approved you to borrow $600,000 as long as the registered valuation of the house is $700,000 or more.
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Why get a pre-approval?

Why bother getting a mortgage pre-approval? Well, even if you’re walking around with a 50% deposit (a super low LVR), and a big income to support any lending you want, it still pays to consider getting pre-approval with your bank of choice or the bank suggested by a mortgage adviser with access to all banks.

To create an advantage for yourself when negotiating on a property and bidding against other potential buyers, if you can get a property under contract without a finance condition where others need to check that their finance will be approved, you can win the property simply through having fewer conditions. The agent will not need to worry that your finance is not yet approved and the property is needlessly tied up under contract for 10 days.

When applying for pre-approval there is always a chance the bank might decline your application based on things you have not anticipated like bad account conduct, overdrafts and missed payments, too much other debt, too many loan facilities already, unpredictable income… Every factor that works against you may also mean the bank adds various conditions to your pre-approval. 

What may be of concern to you is getting the biggest approval possible. This is not necessarily to maximise your lending but to make sure you do not miss out on your dream home simply because somebody out-bid you by $10-15,000 and you did not pick the right lender for maximum lending.

What you might not know is banks have different ways of figuring out how much they would lend you based on certain criteria. This can include your cars, age, income, income types, the number of dependents etc and your borrowing power might be $100,000+ or higher by going to another bank. Take the online mortgage snapshot to figure out your borrowing power and complete the full form not just the short form to find out what bank and how much you can get.

To put specific numbers in play, this means with some banks/lenders you might be able to refinance or buy with $500,000 of lending and simply walking across the street to a different provider means you can get $600,000 – all because of the way that lender assesses your situation. Working with a mortgage adviser will ensure your details are presented in the best light with concerns lenders may have addressed early and in the application.

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