A Pre-approval is an indication from a lender, that they are prepared to approve a loan, based on your income and personal circumstances.

A pre-approval is often conditional, depending on a number of factors, including finding a property that meets the lender’s criteria and getting a suitable valuation. It is also not a guarantee that you will be granted a loan, because both your circumstances and the lender’s policies could change.

However, a pre-approval is an important way for you, the borrower, to gain clarity regarding how much money you can potentially borrow, and also to clarify whether there are any issues with your application that need to be addressed prior to making an offer on a property.

Typically, a pre-approval will count as a credit application, however, mortgage brokers are able to gain an indication from the lender prior to lodging any documents as to whether or not you might be a suitable candidate for a loan.

A pre-approval is an important step in the home loan process, as it gives the borrower the ability to put in a strong offer, knowing that the odds are high that they will be able to get finance and settle on a property.

Pre-approvals are normally valid for three months. Your mortgage broker is able to update your current pre-approval if you need an extension, however, should the time limit lapse without you having sought an extension, you will have to reapply.

There are a range of conditions that come with your pre-approval, the most common ones being:

• No change to your personal circumstances (income, change of jobs or careers, having a child)
• Satisfactory bank valuation
• Lender’s Mortgage Insurance approval, if required
• Property location and type of dwelling must be within the lender’s parameters

A pre-approval is considered to be an important part of the process, and one that you should start looking towards well before you make an offer on a property. Generally, a pre-approval will last between three and six months. But you will have to notify the lender if your circumstances change, as this could have an impact when you try to apply for unconditional approval.

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