How pre-approved home loans can work for you

Published on November 26th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Getting your foot on the property ladder with a house that ticks all your boxes can be a difficult task. However, what if you find the house you have been looking for, but you now have to watch it slip through your hands because you don’t have your financing or a pre-approval to convince the seller to take your offer? Pre-approvals are created to help you stand a chance of snapping up your dream home and here is how it can help you to do that.

What is a pre-approval?

In short, it is when a lender gives you an approved amount to borrow after carefully assessing your financial situation. It is the added reassurance of being able to negotiate and put in an offer on a property that is being sold. A pre-approval can also help speed up the documentation process when you have found the home you are looking for. What it can help with is:

1. Know your price range

Having a pre-approved loan can give you an idea of what property is within your price range. Instead of searching for a wider pool of properties all over the show, you can narrow down your search to locations and properties that match your price range.

2. Your offer will be taken seriously

There are more chances that you will be considered a serious buyer when you have a pre-approved loan ready. Keep in mind that once you have found your house you want to place your offer as soon as possible before someone falls in love with it and beats you to it.

3. Quicken the process

A pre-approval is a lender way of showing you that you have been conditionally approved for a home loan and the amount that you are approved for. This makes completing the process of a full approval easier so that you can get financing quicker to help you purchase your home.

4. Have better leverage when negotiating

It gives you a leg over other buyers who do not have their finances in order. You stand a better chance at negotiating and getting your offer through with a pre-approved loan than without one. Although a pre-approved loan can give you leverage it is important to keep in mind that it is only valid for three months.

What do you need for a pre-approval?

You need to be open and honest about the information that you provide for pre-approvals. Fudging the numbers will only delay the process of you getting access to finance. Other things that can help smoothen your application for pre-approvals are:

  • Provide financial evidence. Getting documents such as bank statements, payslips, tax returns, and checking your credit report.
  • Proof of savings history. Being able to prove that you have a savings history such as the 20% deposit, or other savings accounts that show that you can manage your finances.
  • Constantly update your information. A pre-approval is generally valid for three months and it might take some time finding a property before it expires. Having updated information will smoothen the process of re-applying.
  • Avoid jumping from one lender to another. Avoid having multiple pre-approvals from different lenders as this will affect your credit report.

After finding the house you would like to turn into a home you can then get a full approval which takes an hour or a few days. It is important that you check to see if you meet the criteria of the loan. If you have been rejected, then it is best to find out the reasons as to why you have been rejected so that you can improve on your next application instead of rushing to the next lender.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for home loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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