Why Get Pre Approved Mortgage Finance?

This is an email question from Thom in West Leederville. His question asks – I am considering buying an investment property, and I am wondering whether I should get pre approved mortgage finance? What are the benefits if I do? And what cost is involved?

This is a good question, and one I get asked all the time. Ok, firstly lets look at what pre approved mortgage finance is.

With pre approved mortgage finance, you would generally meet you’re your mortgage broker, and learn how much you could borrow. Then once you have decided on how much your pre approved home loan will be, you will need all the paperwork required to get a home loan.

Most banks or lenders, with pre approved mortgage finance, check the paperwork, do a credit check, and then, hopefully pre approve your mortgage application. Also too with pre approved mortgage finance, the pre approved home loan limit, is an up to amount, so if you find a cheaper property, or don’t need to use the full pre approved home loan limit, then that is fine. For example, if you have a $400,000 pre approval in place, but only need a $250,000 home loan, then that is ok, as your limit you applied for was $400,000.

If you need more than your pre approved limit, provided you have talked to your mortgage broker beforehand, and have ascertained how much you can borrow, you should be ok to increase the pre approved amount, with your application.

Pre approved mortgage finance, with most banks and lenders generally has no cost, and the pre approval lasts on average for 3 months, with most lenders. It is important when you are speaking to your mortgage broker to know all the possible costs associated with any pre approval mortgage application.

If your pre approved mortgage finance expires, it still generally costs nothing with most banks and lenders, to apply for another pre approval.

There are many advantages to pre approved mortgage finance. Some advantages include –

You know how much you can borrow

You have the peace of mind knowing that you finance is pre approved.

A real estate agent may take your offer more seriously, knowing that you have pre-approved finance in place

The pre-approved finance may give you more negotiating power on the property you are thinking of purchasing, as your finance has been pre approved, giving the seller more confidence in your finance application.

Because you have a pre approval in place, most banks and lenders, will be quicker assessing your home loan application, as they have already done part of the work with your pre approval application.

A pre approved mortgage application doesn’t always mean that your home loan will be approved, once you have found a property. The bank or lender will still generally speaking value the property you have brought, re check your paperwork, and do employment checks. Generally speaking though, if your home loan has been pre approved, your formal finance application (when your find the property),. Should be more than likely approved.

If you have any comments, please leave below. If you would like more personal finance information, or to use my services as a mortgage broker, please contact me anytime.