Getting approval for a mortgage loan is a process with no shortage of moving parts.
That’s why residential mortgage consumers need to leave no stone unturned in figuring out where the tripwires lie on the mortgage-approval landscape.
Before the GFC 2008 (global financial crisis), mortgage approvals were like ice cream flavours at Cold Rock Ice Creamery – numerous and easy to get.
But in the last eight years mortgage lenders have significantly restricted their offerings, and borrowers need to be prepared for the tougher requirements or risk being turned down by banks and other lenders.
One area where homebuyers run into problems is failing to make the 'proper distinction' between being 'pre-approved' and being 'actually approved' for a loan.
It’s easy to have your home loan pre - approved, but it doesn’t necessarily mean the Bank or Lender will part with the funds at crunch time. Additionally to understand, if the loan you are applying for is 'Lenders Mortgage Insured' you have a double hurdle to cross as the loan application has to be approved by the insurer as well & insurers do 'not' issue any form of 'Pre - Approval' status.
There are dozens of lenders offering so-called online loan applications, but it’s not until your formal application is submitted to a Bank or Lender & 'credit assessed for risk' by a live action human being that you’re in the clear.
There are differing levels of approval's you can get for a home loan:-
• Pre-approval - Branch - Broker & or Online pre-approval - this is usually a very basic indication of your suitability to borrow an amount from a Bank or Lender. It is 'not' credit assessed & it is an 'indicative approval' only, meaning it is in no way a binding agreement from the Bank or Lender to actually lend you anything.
• Conditional pre-approval - this is a relatively clear indication of a lender's intention to offer to lend you money for a property. It is 'credit assessed' & takes into account your verified personal financial situation, but is not a binding agreement from the lender to lend you anything.
• Unconditional approval - this indicates a Bank or Lender's willingness after your application has been submitted and 'credit assessed' to lend you a specific amount of money given your personal financial situation, for a 'specific property purchase'.
As part of an 'Unconditional approval' process the Bank or Lender will send a registered valuer to value the intended purchase property to ensure you are not paying over the market value - of importance to understand is a Bank or Lender will only lend against the register valuation - not the purchase price.
* Consider using the services of a 'Experienced & Qualified Mortgage Broker' they can add value to the purchasing, borrowing & the property settlement process.
A Broker will gather 'all' the information from you which is required by a Bank or Lender, they will complete a 'Client Needs Analysis' & a 'Preliminary Assement' (ASIC RG 209 -s 120NCCPA) this is a complete assessment of your financial situation, it clearly 'outlines' your borrowing capacity, your ability to repay the loan amount sought & which of the Banks and Lenders, lending criteria you meet, they also understand the 'Mortgage Insurers' policies if the loan is mortgage insured.