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How to get home loan pre-approval

Want to get into your new home quicker?

What is the home loan pre-approval process?

The home loan pre-approval process, also known as conditional approval or approval in principle, is when your bank conditionally approves or denies you for a loan before you apply to buy a house.

The bank or other lender checks your finances and assesses whether you’ll be able to successfully repay a loan. If they deem you eligible, you’ll be granted pre-approval to borrow up to a certain amount. Most banks offer pre-approval which lasts for 3 to 6 months, giving you plenty of time to sort out the right home loan.

Pre-approval is essentially a guarantee to be approved for a loan if you apply for it, which can be a very useful thing to have while you hunt down the perfect home. After all, it’s incredibly exciting to buy your own home or investment property, but it’s a lengthy and often complex process, and pre-approval on your loan will make the whole process go a lot smoother and quicker.

So what happens in the home loan pre-approval process? How do you get it? And at the end of the day, is pre-approval actually worth getting?

How to get pre-approved for a mortgage

Applying for a house can be a stressful time in a person’s life however there is a process that you can follow to increase your chances of getting pre-approved for a mortgage. Canstar have put together our top 3 steps to help smooth out the application process and bring you one step closer to the great Australian dream.

1. Review your current finances

The first step in the home loan pre-approval process is doing some initial research into your own finances. Consider your income, your typical expenses, what assets you own and how much you owe, and from there you can get a rough idea of how much you can afford to borrow:

Try our Home Loan Borrowing Power Calculator

You should also consider how much you might be able to afford in monthly repayments, as this will affect how much you are able to borrow:

Try our Home Loan Repayment Calculator

2. Consider what sort of home loan you applying are for?

After reviewing your finances, you should also have a look at different types of home loans (fixed vs variable, offset vs redraw) and decide which one is right for your situation.

3. Fill in the pre-approval application with a lender

Having got an idea of the sort of loan you’re after, it’s then a simple matter of applying to your bank for pre-approval (not making the loan application). Most banks let you apply online, over the phone, or in person at a branch. Your application will initially require some basic personal information in order to verify your identity – such as your name, address, and age.

Once you’ve sat down with your lender, they will assess several things:

  • Your credit report, or credit history, which is a record of your loans, credit cards and other credit products over the past several years, including any defaults or bankruptcies. Your credit report determines your credit rating, a numerical score that rates your ability to pay back credit on time.
  • Your current financial situation as mentioned above, including how much you own and how much you owe.
  • The loan you’re looking to apply for, and whether or not this is reasonable given your above finances.

Having analysed your finances, your lender will then decide whether or not you’re eligible for the loan that you’d like to take out. If they think you’re capable of repaying the loan, then they will likely grant you pre-approval!

Do all banks offer pre-approval?

Canstar researches and rates over 1,100 home loan products in Australia. Here’s what we found:

loan pre-approval

The home loans that currently do not offer loan pre-approval are as follows:

Bank Home Loan
B&E Personal Banking FlexiDiscount
B&E Personal Banking FlexiDiscount LVR Special
Heritage Bank Discount Variable 150k+
Heritage Bank Variable
Police Bank Premium Variable
Regional Australia Bank Partnership Advantage Variable 250-399k
UBank UHomeLoan – Standard Variable IO
UBank UHomeLoan – Standard Variable PI
UBank UHomeLoan – Real Reward Offer IO
UBank Value Offer – 20% Deposit Minimum
Virgin Money Reward Me – Owner Occupied Var 80 75-499k
Source: Canstar View, 14 December 2016

Please note this information has been provided to Canstar by the loan providers – please check directly with your lender to confirm whether pre-approval is available.

If you’re keen to get pre-approval on your loan, you may want to avoid any of the above loans until further notice.

Which banks offer pre-approval applications online?

We had a look at which lending institutions on Canstar’s database offer pre-approval applications online to owner-occupiers paying principal and interest on fixed or variable rate home loan products. There are currently 38 providers who accept home loan pre-approval applications done via the internet.

Below is a snapshot of these online pre-approval home loan products, with links to provider’s websites. Each product is sorted by Star Rating for a $350,000 variable rate home loan to buy your next home in NSW, paid off on principal and interest repayments.

Should I get pre-approval?

Home loan pre-approval is by no means compulsory. If you’ve found your dream home and the right loan product for your needs, you can go right ahead and apply directly to your bank without asking for pre-approval.

That said, pre-approval is a useful guarantee to have. It has several main benefits when house hunting.

First, pre-approval means you can go from open houses and inspections knowing exactly how much you can afford to spend. You know you’ll be able to get a mortgage on a house within a certain price range, so you won’t waste time looking at homes you can’t afford.

Secondly, pre-approval gives you the ability to make a serious offer on a home on the spot, as both you and the home’s owners can be sure you’re the real deal.

Finally, it takes away the headache of having to search out and reconsider a whole bunch of different loans every time you find a property you want to make an offer on. You may make an offer on several homes before being successful, after all.

The home loan pre-approval process takes some time and effort to get, but it’s definitely worth it for the freedom and peace of mind it provides. Most Australian property buyers will find pre-approval a very useful tool. To find a great loan and ask for pre-approval, compare more than 1,000 different home loans on value for money and features on the Canstar website with our expert star ratings:

Compare Home Loans

Learn more about Home Loans

 

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