Finance focus
Why is a loan pre-approval so important?

Pre-approval is a green light from a lender. Put simply, it confirms you’re eligible to apply for a home loan up to a certain amount. Essentially, the lender checks your financial circumstances, to decide if you’ll meet their criteria and can afford to repay a mortgage. A home loan pre-approval usually lasts for three to six months and gives you a set budget during your property search. Here’s why home loan pre-approval is so important.

To confirm your borrowing power

Before you start shopping for a property, it’s important to confirm your borrowing capacity. Online calculators can give you a general indication of what you might be able to borrow given your income and savings. But they don’t accurately confirm what size repayments you’ll be able to make after you meet your other living expenses and financial commitments.

With a loan pre-approval, you’ll know exactly how much you can afford to pay for a property. It gives you a solid understanding of your finances and a clear spending limit.

To save time on the property search

Imagine spending months looking for your dream home, only to be rejected for finance once you found it. Confirming how much you can borrow eliminates the chance of this happening. It gives you a budget for your property search which will help you save time, avoid wasted effort looking at properties you can’t afford and prevent disappointment.

To beat the competition

In a hot property market, you need to be able to move fast. Properties that are in high demand can be snapped up before you know it, so it’s important to be ready to make an offer as early as possible.

Pre-approval gives you the ability to make an offer on a property on the spot, with the confidence of knowing you’ll be able to get the finance organised quickly. It also signifies to vendors that you are the real deal and helps you negotiate from a position of strength.

To protect your deposit

Before you hand over your deposit money, it pays to make sure you can get the home loan you need to complete the purchase. If there is some issue with your eligibility, or a lender won’t approve the amount you need, you could potentially lose your hard-earned deposit.

Pre-approval gives you an important financial safeguard. And if you’re buying at auction, pre-approval is particularly important because your deposit is non-refundable. Once the hammer goes down and you’ve made the highest bid, you’ll be locked into the purchase. For that reason, you must make sure your finance approval is rock solid first.

Don’t forget to get approval on the property too

Before you attend an auction, sign a contract of sale or put down your deposit, it’s also a good idea to ask us to confirm if a lender will approve a loan for the property you have selected. Be aware that certain properties may not be acceptable to some lenders – if it is unusual, remotely located or has other problems, this step is particularly important.

Once you find the right property, you’ll still need to make a formal loan application to the lender. As part of this process, the lender will require a valuation of the property you select.

Apply for pre-approval today

Spring is here and it’s the busiest time of year in our property markets. If you’re ready to start your hunt for a new home or investment property, talk with your mortgage broker about pre-approval now. They’ll explain the process and get you started on shopping for your dream home with confidence. Get in touch today.


The information provided is general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. This article does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.