Home loan pre-approval

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.

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.

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.

#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.

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

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.

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.

Need help? Just ask

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

Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Made with love at Circular Quay in Sydney, Australia. © 2021. All rights reserved.