How to get prequalified for your first home loan

A key step in the home loan application process is getting pre-approved for your desired principal. Whether you are buying your first home, investment property or commercial property, getting a lenders pre-approval means you can commence evaluating different property options on the market knowing; when you find the right one that matches your budget, you could move to make an offer quickly.

In the pre-approval process, Banks/ Lenders will look at your credit records, income and expenses to determine the loan limit and type of products including the interest rate that they are willing to offer you. Providing all other conditions are met, getting a pre-approval is more or less a commitment from a lender to confirm, you are able to borrow up to the approved limit. However, pre-approval is not a Formal Approval offer from the bank, rather an acknowledgement, if the outlined conditions in the pre-approval letter are verified and valuation confirms the proposed purchase price, then your application will be unconditionally approved. A pre-approval notice or letter will also add credibility to any offer you make on a property and will help real estate agents and owners understand that you are serious about buying which could help with negotiations.

Step 1. Check the Status of Your Credit

Before applying for pre-approval, it’s recommended to talk to a broker about your credit score and financial situation. It’s free to check your score once a year, having this report handy will help your broker to select & approach the right lenders on your behalf. In case of any defaults or negative marks against your name, here at Easy2Mortgage we will refer you to our network of professionals that are specialised in repairing Credit Defaults. Where it’s possible, they will take the necessary steps to repair these issues before we present your application to any lender. This review will also allow you to see all credit facilities that you currently have open, and potentially help decide whether these can be consolidated, eliminated or rolled into your home loan.

Step 2. Prepare Your Documentation

Generally speaking, banks and lenders will want you to provide enough information for them to make a fair and reasonable assessment of your financial position. This will include proof of identification (100 points) as well as proof of income, expenses and cash flow. If you are a customer of the bank that you are applying for, this can be easier than going to other institutions that don't have any visibility of you as a customer, however you will still need to provide other documents to be verified.

The information and documentation you will need to gather includes:

Proof of Income - Payslips, Tax Returns or Business Income Statement
Current Open Credit Facilities - List of the credit cards, store cards and personal loans that you have.
Monthly expenses - be ready to show where your income goes at each payment. You will need be honest & realistic and make sure you’ve declared all of your regular and repetitive expenses, as Lenders have a good understanding of the average cost of living expenses.
Proof of Identity - Make sure that you can produce 100 points of identification, that has the correct address and legal names.
Asset Information – if you want to use equity from your assets with significant value like; residential/ commercial properties in your application, you will need to provide proof of ownership

Step 3. Submit Your Application or Speak to an Expert

The final step in the pre-approval application process is to actually submit your application. Getting the help of a qualified and experienced mortgage broker at this point can add a lot of value to your application. As a expert in the home loan application process, they will be able to help you gather relevant information that will help strengthen your case and help you understand which banks, lenders and products are suited to your requirements.

Step 4. Receiving your Pre-Approval Notification

Getting pre-approval can take anywhere from 24 hours up to a couple of weeks, depending on the strength and complexity of your application. It is also important to note that pre-approvals usually have a specific time limit or expiry associated with them. Depending on the lender in most cases, a pre-approval will be valid for around 90 days, which gives you time to assess the market and find a property for your needs. Make sure when you receive your pre-approval, you take note of its expiry date and contact your lender if you are approaching the date. Some lenders will offer pre-approval extensions if your financial situation remains the same, which can minimise the time and administrative effort of keeping your pre-approval valid

If you would like to find out more about the pre-approval process, have questions about your application or would like free advice on anything relating the home loan application process, reach out to our trusted and experienced Easy2Mortgage team for an obligation free and confidential discussion.