Mortgage Pre-Approval – A Beginner’s Guide

If you have found your soulmate and you are both looking forward to finding your dream home and starting a family, you will have to negotiate a home loan. This is easier said than done, and with that in mind, here is some important information to help you receive pre-approval from a real estate lender.

Pre-qualification Vs Pre-approval

These terms are slightly different; mortgage pre-qualification is based on self-produced information, while pre-approval involves actual documentation and from a seller’s point of view, mortgage pre-approval holds more weight. If you are planning to start house-hunting, you should obtain mortgage pre-approval, which is documented evidence that a lender is prepared to assist in the purchase of real estate. The pre-approval letter from the lender states that, based on the evidence, the lender is prepared in principal to the loan, although it is not a binding agreement. An applicant is entitled to back out of any loan offer, just as a lender can also change their mind, should the applicant’s status change. If you would like to apply for mortgage pre-approval, talk to one of the home loan brokers in Parramatta, NSW and they can facilitate the process.

Check your credit score

Prior to applying for mortgage pre-approval, you are advised to check your current credit score to ensure that all is well; it would be wise to pay off small debts prior to checking your score. You should also ask for a credit report, which you should scan for errors; in the event you do find a mistake, inform the credit agency and it can be amended.

Debt to income ration

Your debt-to-income ratio is the percentage of your income that goes on debts; lenders prefer a debt-to-income ratio of 36% or less, which would include the potential home loan. A ratio of 45% or higher would likely result in the lender requesting you to reduce your monthly outgoings to allow for the repayment of said loan. Click here to learn about build-to-rent solutions here in Australia.

Documentation to provide for mortgage pre-approval

The following would likely be required when you apply for a mortgage pre-approval in Australia:

Proof of identity – An Australian passport, Australian driving licence or Australian Tax documentation.
Proof of employment & income – You will have to provide evidence of your employment and your current income.
Proof of deposit – The lender may well ask you for proof that you have the required sum in a savings account. It can be a challenge to raise this kind of money and it is a vital aspect of the mortgage pre-approval process.

When you take to a leading mortgage broker, they will be able to help you to obtain pre-approval, as they have a wealth of experience in helping clients acquire the essential loan pre-approval that allows them to start house hunting. There are many fees associated with real estate acquisition  and you should crunch the numbers to ensure you can afford to go ahead with the deal.


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