Buyers often had to commit to properties quickly, with above market rate offers due to a strong level of interest. Now with six cash rate rises in a row since May 2022, the property market is no longer a rapid frenzy of real estate hungry Aussies. Buyers have more leeway to find a house as the cost of finance has reduced the level of demand.

Shopping around for the perfect home is made possible by first getting a home loan pre-approval. After the lender assesses your position with some of your personal financial information, they provide you with a pre-approval letter formalising how much you could potentially borrow. It gives shoppers an idea of their maximum available borrowing capacity,  equipping them to house hunt within a specific price range. 

A home loan pre-approval helps buyers in many ways. First, it simplifies their search because they know the price range they can afford. Online real estate listings can be filtered by price, location and property type to suit their budget.

Secondly, the home loan pre-approval lets buyers bid in auctions and negotiate with more confidence. It provides them with their likely borrowing capacity and gives them an estimate of what they can afford when placing an offer.

Lastly, and quite crucially, the pre-approval signals to sellers that you are serious about the purchase.

It is important to remember that getting pre-approved for a mortgage does not guarantee loan approval when a property is selected. The pre-approval process is designed to give borrowers an estimate of how much they could be approved for, based on the information provided at the time. There are many factors that can affect the actual approval amount from changes to a borrower’s income, employment situation, or even factors out of their control such as interest rate rises. It is recommended to stay in close communication with your lending specialist throughout the process, so you can make any necessary adjustments along the way.

However, it is crucial to remember that home loan pre-approvals become null and void if the cash rate gets changed by the RBA at the start of the month. On top of that, even if interest rates stabilised, these pre-approvals are usually only valid for 90 days.

Unsure about how to begin the process? You can start by reviewing your current position and organising all your financial documents. Do your own research about which lenders can offer the best overall product or contact a mortgage broker to help you out. Compare each offer holistically and consider your short, medium and long-term plans.

Applying for a home loan pre-approval is similar to applying for a home loan. Lenders assess your credit score, income, employment history, debt-to-income ratio, and many other factors. Your income is one of the most important factors that lenders consider when determining whether or not to approve you for a loan. Be sure to have all of your financial documentation in order before applying for a mortgage so that the lender can get an accurate picture of your ability to repay the loan.

Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.