Home loan pre-approvals explained:
the what, why, when and how
Estimated read time: 2 Minutes
Your home loan pre-approval is an important step in your home-buying journey. It gives you an indication of how much you can borrow, plus, it helps you bid with confidence when you find the right property.
Our guide gives some tips and tools to help you make the right decision for your situation.
What is a home loan pre-approval?
Pre-approval, indicative approval and approval in principle all mean roughly the same thing - that your lender has agreed in principle to lend you a certain amount of money. To do this, they assess your financial situation and determine how much you can afford to borrow. It’s important to remember that pre-approval is not a guarantee of funds. It’s an indication that unless your circumstances change, that you’re likely to have your loan approved. So you can start the exciting part of the home loan journey - looking for a new home!
Once you’ve found your property, your lender will carry out a property valuation and reassess your personal finances before granting conditional approval – the final step towards securing your home loan.
Did you know?
Why do people apply for home loan pre-approvals?
Pre-approval gives you an indication of how much you’re able to borrow.
Sellers and real estate agents also look at pre-approvals favourably. It shows you’re a serious buyer, and less likely to withdraw an offer due to a lack of finance – which might give you an edge if you want to negotiate an offer.
Hint: If you’re bidding at an auction, it’s important to know what your upper limit is when you’re bidding.
When’s the right time to apply?
Most people apply for home loan pre-approval when they are ready to start looking at buying a property. But before you apply, it’s wise to keep a few things in mind.
Applying for multiple pre-approvals from different lenders in a short time frame can impact your credit score – so it’s a good idea to choose your preferred lender first.
Pre-approvals generally expire after three or six months, though most lenders are willing to extend if your situation remains the same.
Your lender will need to reassess your application if your circumstances change – for example, if you change jobs, have a baby, or take out a personal loan.
How long does pre-approval take?
Although the end-to-end Pepper Money home loan application process can take up to six weeks, getting home loan pre-approval can be as quick as 2 business days if you provide all the required documentation upfront.
Home loan pre-approval requirements include recent bank statements, payslips or other proof of income, personal identification and a summary of your assets and liabilities (such as savings and other loans).
We’re here to help
To get a home loan pre-approval with us, contact one of our Lending Specialists on 137 377 or request a call back by filling in our online form. They will guide you through the process, explain your options, and answer any questions. Alternatively, speak with your Pepper Money accredited broker.
It’s useful to have the following information on hand when you do chat with us:
- the price range of the properties you’re looking at
- how much deposit you have available
- details of your income and living expenses.
Alternatively, to get an estimate of how much you could borrow with Pepper Money try our borrowing power calculator today.
Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending
Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.
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