Should I get a home loan pre-approval?

When you’re in the market to buy property, it could be useful to understand how much you are eligible to borrow from a lender. Conditional pre-approval for a home loan is not essential, but can potentially be handy for some people.

What is a home loan pre-approval?

A home loan pre-approval, also known as conditional approval or approval in principle, is when a financial institution gives you an estimate of how much you could borrow for a home loan, provided you meet certain conditions. This is generally confirmed in writing with the conditions clearly listed.

Conditions could include paying off an existing debt, selling another home or providing further documentation (for example, a professional valuation of a property you would like to purchase), depending on your circumstances.

The process of getting a pre-approval typically involves applying to your selected lender, who will check your finances (such as checking your credit score) and assess whether you’ll be able to repay a loan.

If the lender offers conditional approval and deems you eligible, you’ll be granted conditional pre-approval to borrow up to a certain amount. Most financial institutions offer conditional pre-approval which lasts for three to six months.

Gaining conditional pre-approval can be a useful thing to have while you hunt down the perfect home, providing you insight into where you may stand with lenders and potentially making you more appealing as a buyer by demonstrating you are ready to proceed with the purchase.

However, it is important to note that conditional approval is not a guarantee that you will be approved when you find a property to buy and proceed to formal approval for a loan.