Home Loan Pre-Approval

Shopping around for a property can be a daunting experience, particularly if you have any lingering questions around how much you can afford to spend. However, you can overcome at least this one niggling concern by approaching the bank to obtain home loan pre-approval or pre-qualification. It’s important to note that both of these result in different outcomes, in terms of having a good understanding of your home buying budget. And critically, never assume that either the amount you are pre-qualified or pre-approved for is what you have to spend when it comes to the crunch. Re-qualification is the first step toward a full loan application.

At this stage, the lender generally doesn’t seek to verify the details around your income, expenses, assets and liabilities with supporting documentation. Rather, you provide some figures for them to input into their calculators and they give you an estimate around how much loan you can afford. In other words, the accuracy of the pre-qualifying amount you are told you can borrow depends entirely on the validity of the information you provide the bank. This means the question of what you can actually borrow and even if you will qualify for a loan at all, remains unanswered.

On many occasions, pre-qualifying amounts quoted by lenders exceed the would-be-buyer’s initial idea of what’s affordable to them.