Home loan pre-approval

By Andrew Liston, Home Loan Specialist
Published on 7 March 2019

Sometimes referred to as approval in principle, pre-qualification or indicative approval, home loan pre-approval is an essential part of the home loan process. Here we’ll explain what it is and how you can get pre-approved.
Read more at https://www.lendi.com.au/guides/home-loan-pre-approval/#ZWikloyvJhjdkBkp.99

Wondering how much you could borrow?
Calculate your borrowing power based on your income.

Calculate now

What is home loan pre-approval?

Home loan pre-approval is simply an indication that a lender is likely to approve you for a home loan. It is an offer from the lender for a specific home loan for a fixed amount, should you be fully approved. Home loan pre-approval is generally granted to borrowers intending to purchase a new property.

Read more

Bank didn’t pass on the RBA rate cut? Here’s how to still save.
4 July 2019- by Scott Smith, Product Marketing Owner at Lendi

Bank didn’t pass on the RBA rate cut? Here’s how to still save.
4 July 2019- by Scott Smith, Product Marketing Owner at Lendi

Calculate your home loan repayments

Get a free property report in seconds
Search an address for price estimates and sales history.

Search a property

How do I apply for home loan pre-approval?

To apply for pre-approval, there are a number of steps a borrower must undertake in order to be approved.

#1 Firstly, shop around and compare loans:
It’s smart to shop around for multiple lenders to make sure that you get the best deal. If you’re unsure, a Lendi Home Loan Specialist can help you find the right loan for your specific situation.

#2 Complete an application:
This will include listing your income, expenses, assets, and liabilities. You can easily do this online with Lendi.

#3 Provide supporting documents:

  • This documentation helps the lender assess your profile. It typically includes:
  • Identification such as a passport, driver licence or birth certificate
  • 2 most recent payslips
  • Most recent group certificate / PAYG summary
  • Loan statements for any existing loans you many have e.g. credit cards, personal or car loan, home loan

#4 Proof of funds:

You’ll also need to provide the lender with proof of your funds i.e recent bank statements, term deposit, equity, shares, or a gift letter from family. The following needs to be displayed on the document for it be acceptable to the lender.
Your name, or the name of an immediate family member
The funds available
A recent date, no older than 4 weeks

#5 Do your savings qualify:

Check that your lender considers your funds as savings. For instance, money saved under the mattress may not be acceptable. Ask a Home Loan Specialsit if your savings qualify.

#6 Ability to complete the purchase:

Make sure that you have the necessary funds to cover the initial costs of lender fees, stamp duty and the deposit in order to complete the purchase. Your Home Loan Specialist can provide you with an accurate estimate of these costs.
Related: A guide to the upfront costs of buying a home

#7 It’s up to your lender:

Next, your chosen lender will assess your capability to pay back the loan. If all goes to plan, they will then grant pre-approval.

Calculate your equity in 15 seconds
See how much cash you could access from your property.

Calculate now

What are the benefits of home loan pre-approval?

  • There are a number of benefits to getting home loan pre-approval before you begin your property search. Some of them include:
  • There is no cost to be pre-approved by your lender
  • It gives you an idea of how much you could potentially borrow
  • The offer is valid for up to 3-6 months (you can extend the pre-approval at the end of the term, simply talk to your lender or Home Loan Specialist)
  • You’ll be able to attend auctions comfortably, knowing what you can and can’t afford
  • Vendors can sometimes favour buyers who are pre-approved and ready to purchase because they can potentially settle sooner

What home loan pre-approval conditions I should be aware of?

Before you are granted home loan pre-approval, you will need to consider the following:

  • All of the information in your application must be correct and accurate
  • You will need to supply a number of documents with your application including ID verification, recent payslips, most recent group certificate/PAYG summary and recent loan statements for any existing loans
  • Lenders Mortgage Insurance (LMI) should be discussed with your Home Loan Specialist and decided if appropriate for your case
  • There is a designated amount of time your pre-approval will be valid for (usually 90 days), so take this into account if you are not planning on buying soon

Will you need to pay LMI?
See how much you might need to pay if you’re low on a deposit.

Calculate LMI

Can home loan pre-approval be withdrawn?

Sometimes lending policies change, which might render your pre-approval application invalid. Keep yourself informed of your lender’s current rates and policies in order to stay on top of your home loan application process, as lenders will not inform you unless asked.

Is there a possibility my pre-approval could be rejected?

Just like any home loan, there is a possibility that a pre-approved home loan may also be rejected. Here are a few reasons why:

  • Your income documentation was poor/was not proved properly
  • You have a bad credit history
  • If your loan amount exceeds 95% of the property’s value
  • There may be a sudden policy change with your lender
  • If your lifestyle or financial circumstances suddenly change

I am pre-approved, what next?

Now that you’re pre-approved you can start your property hunt. You can now bid at auctions knowing what you can and cannot afford.
Remember, if you haven’t found the perfect property in 90 days you can extend your pre-approval period at no extra cost. You can do this by contacting your Home Loan Specialist.

Will you need to pay LMI?
See how much you might need to pay if you’re low on a deposit.

Calculate LMI

I’ve found a property, what now?

Once you’ve made an offer on a property and it has been accepted, let your Home Loan Specialist know and they will get the wheels in motion to finalise your home loan.

  • Your Home Loan Specialist will instruct your lender to conduct a valuation of the property
  • Your conveyancer or solicitor will arrange building and pest inspections for your property
  • Send a copy of your contract of sale to your Home Loan Specialist

While this can be a stressful time for many home buyers, your Home Loan Specialist is here to do the heavy lifting for you. They’ll deal with the lender directly and guide your home loan to settlement.

Can I extend my pre-approval?

Yes, you can. The designated amount of time pre-approval is valid typically varies between 3-6 months, but if you haven’t found the right property in that time you can extend your pre-approval term.
The good news is that since you have recently (3-6 months ago) provided all of your financial information, you can extend this period without re-doing the entire process. However, if you let it expire, you’ll need to apply for pre-approval all over again.

How do I extend my home loan pre-approval?

It’s easy and free to extend your pre-approval. Simply contact your Home Loan Specialist or lender before your pre-approval expires.
Your extension can be completed quickly and it means that you won’t need to go through the application process again. In some instances, it may require a reassessment of some aspects of your financial position.

Got your eye on a property down the street?
Find out how much it’s worth with our free property report.

Search a property

Need help? Just ask
Got more questions about home loan pre-approval? Chat to a Home Loan Specialist today for free expert advice

Check today’s low rates
Tell us what you are looking for and see if you can save.

Search rates