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A Guide to Pre-Approval

Pre-approval is a financial term that means a lender has agreed in principle to loan you up to a set amount towards the purchase of a home. It is also known as conditional approval (rather than unconditional), indicative approval, approval in principle, etc.

Pre-approval is particularly useful for first-home buyers, as we’ll explain below while also answering some common questions about it.

How Do I Qualify for Pre-Approval?

The lender’s decision as to whether or not to grant you pre-approval on a home loan will be made based on your income and assets, the size of the deposit you have saved, your living expenses and existing debts, and, of course, the price range of the sort of properties you are considering.

Note that some lenders won’t give pre-approval for certain locations or property types/conditions, e.g. a place needing serious repair (regardless of your renovation skills). It’s worth checking on their list of unsuitable upfront to avoid having your pre-approval withdrawn as a result.

Is Pre-Approval a Guarantee?

No. Your pre-approval can be withdrawn for a number of reasons, including changes to any of the following: your financial situation, the property itself or its assessed value, relevant government regulations or interest rates. However, lenders understand that unforeseen events occur and you can always reapply for pre-approval.

Pre-approval may also come with conditions, e.g. you’re selling another house to raise additional funds.

Does Pre-Approval Take Long to Get?

The process of being granted pre-approval may be as simple as attending a quick interview with the lender. Assuming, that is, you have all of the necessary information on hand and they are happy with everything. This will not be the case with every lender, though. Others could take a week or more to reach their decision.

What Are the Advantages of Pre-Approval?

There are a few advantages of pre-approval – and they are big ones. Firstly, having this written confirmation from the lender sets you apart from potential rival buyers and shows sellers that you are serious and ready to act now. The second thing pre-approval does is make you aware of your borrowing limit, allowing homes priced (or expected to fetch) above this figure to be immediately eliminated from consideration. Thirdly, pre-approval lets you take action with a great deal of confidence, whether that means putting in an offer or attending an auction.

Are There Any Disadvantages?

Pre-approval is for a limited period, usually three to six months. However, if you’re already deep into house hunting, this shouldn’t be a problem. Especially if you’re being assisted in your search by a real-estate firm. And, as previously stated, you can reapply for approval.

That said…seeking pre-approval too often in a short space of time will be recorded in your financial history and can reflect badly on you in the eyes of lenders.

I’ve Got Pre-Approval. What’s Next?

Ready to buy? Whether you’re a first-home buyer or an “old hand”, the professional team at Abode Real Estate in Cottesloe will be glad to help you find the perfect property. Contact us at or by calling (08) 9381 9111. We look forward to exceeding your expectations!

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