What is pre-approval?
Pre-approval, what does it mean? With so many finance terms thrown around it can be easy to get confused. Here we explain exactly what this means to make things easier for you!
Put simply, pre-approval is a lenders written assessment of how credit worthy you are for a loan and is usually subject to some conditions that need to be completed, such as the value of the home you are buying. They will assess your ability to repay a loan based on factors including: income, living expenses and current repayments. They will also take your credit history, employment history etc into consideration to determine your willingness to repay. A lender wants to be confident you will have no issues managing your loan.
Pre-approval will reduce your stress during the house hunting period. Usually valid for a couple of months, you can visit display and homes for sale galore knowing that finance is ready for you. It is important to understand though, that pre-approvals are not a guarantee of finance. That is why it is important to speak to your mortgage broker as pre-approvals that can be completed online for example and may not always consider your ability to repay etc.