Everything You Need To Know About Bond Pre-Approval

Shopping for a home is an exciting but nerve-wracking process. There's no telling how long your search might take or when and where you'll find a property that ticks your boxes.

Once you've found a suitable home, there's still the matter of financing. Getting pre-approved for a home loan can give you more credibility as a buyer while reassuring sellers and intermediaries that you're likely to secure the required finance if they accept your offer. By putting in an Offer To Purchase and having it accepted, you'll still need to provide the seller with proof of finance (in other words actual approval for a home loan) by a certain date, or the offer will lapse.

While it doesn't guarantee that your bond application will be approved, it can give you a reasonable indication of what you can afford. This can help you refine your property search and show sellers or agents that your buying power is more likely to result in a bond approval. Here's what you should know about getting a bond pre-assessment.

What is bond pre-approval?

Most people rely on a bond to finance their home, no matter what they earn or the property's value. Few of us have the kind of money required to purchase a property outright without financial assistance. The value of the bond you qualify for can depend on many factors, including your financial history and salary. Many people wait until they have found a home they want to purchase before applying for a bond. As different lenders calculate affordability in different ways, it is challenging to predict if your application will be approved before making it.

Getting a bond pre-approval involves working with a lender to generate an estimate of what you can afford. As you can do this before you begin house shopping, it gives you a price range you're likely to qualify for — but won't guarantee that any resulting bond applications will result in approval.

How to get pre-qualified for a bond

There's no one-size-fits-all pre-application process. Generally speaking, the more accurate information you provide a lender with, the more realistic your pre-approval will be and the more likely it will be to result in actual approval. You'll need to submit a range of up-to-date financial documents to prove you consistently receive a certain income and can afford to make monthly bond repayments while still also being able to meet your other monthly living expenses. Lenders can also look at your financial behaviour and credit repayment history to see if you have multiple lines of credit and have a record of honouring your payment obligations.

How can bond pre-approval benefit me as a buyer?

There are many advantages to getting pre-approved for a bond. Here are some of them:

• It shows you're a serious buyer: People often contact sellers and estate agents or attend open houses and viewings out of curiosity — without any intention of making an offer. Being pre-approved can make you more attractive to seller and agents as it indicates you're serious.
• It shows you how to improve: Your pre-approval amount could be lower than expected, meaning you wouldn't qualify for the type of homes you're interested in without making changes. You can use this information to revisit your finances or adjust your expectations. For example, you can decide to spend an additional year saving up to increase your deposit amount or you can look at homes in a more affordable area.
• You can make more educated decisions: Buying a home can come with many additional costs you didn't consider. This can include legal and administrative fees, moving fees and renovation costs. Knowing what you qualify for can help you calculate if you can handle forking over extra money in the long run. For example, you could realise that while your pre-approval amount is affordable, buying a fixer-upper requiring extensive repairs would be out of your budget in the long term.

How to get your pre-assessment certificate

Knowing the difference between pre-approval and actual approval can be challenging as some home buyers aren’t familiar with the terminology or don’t understand the process. To simplify the process and make things easier for our clients, SA Home Loans will help you obtain a pre-assessment certificate you can use in your home shopping process.

To ensure this pre-assessment is as accurate as possible, we don't offer an automated online application process. Instead, you will deal personally with one of our expert property finance consultants to complete the pre-assessment. This gives you the chance to ask questions about the process and to be guided on your financial situation, what you can afford and how to improve your chances of approval.

Once you've provided the consultant with a complete and accurate outline of your income and expenses, they'll run a credit check (with your permission) to assess your credit profile and affordability. This will help them generate a pre-assessment certificate for you, so you can begin browsing for appropriate homes.

Once you find a home you want to put in an offer on, your consultant will complete a formal application, a valuation of the property you want to buy will be done, and your income and expenses will be verified before your home loan is approved. If your financial information is accurate and hasn't significantly changed between applying for a pre-assessment certificate and applying for a bond, the chances of being declined for the bond will be lowered.

Speak to SA Home Loans today

We would love to assist you in making sure you can have the confidence to start your home buying journey, with a pre-approval to give you the buying power you need. To find out how to get started, contact us today.