Australian Property News

Not all pre-approved home loans are the same

Posted on Wednesday, February 29 2012 at 1:40 PM

Do you have pre-approval for a home loan? If so, you probably have a set budget in mind and an idea about the type of property you’re looking for. But according to Smartline Personal Mortgage Advisers, anyone with pre-approval should be cautious about any offer they make before they sign a contract.

Director Chris Acret says not all pre-approval loans are the same and borrowers need to know exactly what they’re getting.

“In some instances, the pre-approval process can be pretty basic if the lender has just done an initial credit check and reviewed the borrower’s credit score, providing a conditional approval,” he says.

“If the lender hasn’t actually looked at a full application and reviewed the borrower’s individual circumstances, they’re really just saying ‘yes, you can probably have a loan’ rather than ‘yes, you can have a loan and this is how much we’re prepared to lend to you’. There’s obviously a very big difference between the two.

“Some lenders do a more detailed pre-approval that provides the borrower with a lot more confidence. Armed with this, they know exactly how much they can afford to borrow – so minimise the chances of wasting time looking at properties outside their budget – and that the lender is actually comfortable lending them that amount.”

Potential homebuyers should be cautious about going through the pre-approval process out of curiosity or if they’re not really serious about looking for a property, particularly if they do so several times.

This is because seeking a formal pre-approval puts a credit enquiry on the person’s individual client record. If you have too many credit enquiries within a short period of time on your credit card record, this is seen as a negative by the bank as you’re viewed as ‘shopping for credit’.

“Quality mortgage advisers have access to detailed information about the products and policies of the various lenders and can perform a credit check to confirm that you have a sound credit history,” Acret says.

“They’ll be able to give you an idea as to whether you’d be likely to secure a loan and if so, how much you’d be able to borrow.”



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