A pre-approval is when you send all your financial documents to the bank before finding a house. The bank then gives you a preliminary green light, saying, “We’ll approve your loan once you find a suitable house.”
Types of Pre-Approval
- System Pre-Approval: Here, your information is entered into a computer, and it quickly decides if you might be approved or not. This type isn’t very reliable because no one personally reviews your application, and it often comes with a lot of conditions that favor the bank.
- Fully Assessed Pre-Approval: This is where all your information and documents are reviewed by a credit assessor at the bank. It’s more thorough and gives you greater assurance that your loan will be approved.
It’s best to avoid the first type of pre-approval. While it’s faster, it’s often not dependable and can cause issues later. The fully assessed pre-approval is more work but gives you and your broker peace of mind that everything has been properly checked.
Why Do You Need a Pre-Approval?
- To Improve Your Chances of Getting a Property: In today’s competitive market, some houses receive many offers. A pre-approval can help you stand out because it shows the seller and the agent that the bank has already reviewed your finances, making your offer stronger.
- To Participate in Auctions or Make Unconditional Offers: If you want to bid at an auction or make an offer without conditions, you need to be sure your loan will be approved. A fully assessed pre-approval is the safest way to do this.
- To Resolve Issues Before Finding a House: A pre-approval process can help uncover and fix any financial issues, such as unknown defaults or employment problems, before you start house hunting. This way, you won’t be stressed about fixing these problems while trying to buy your dream home.
How to Get a Pre-Approval
First, we’ll have a detailed conversation to understand your financial and personal situation.
Next, we’ll gather all the necessary documents to complete our research and provide recommendations. We’ll then have a meeting to discuss everything, including which banks we recommend, your borrowing capacity, and the maximum price you can afford for a house.
This could mean applying for pre-approval right away, or it might involve setting up a 3 to 6-month plan to get you ready for pre-approval.
Your broker is here to support you throughout the process. Let’s set up a time to discuss how we can get you pre-approved so you can confidently buy your home.
