If you are looking to buy a home or an investment property in the near future, then home loan pre-approval is not something to take lightly. It can make your home buying process much smoother and help you get the home of your dreams.  But what exactly does it entail? Getting home loan pre-approval involves gathering documents that show evidence of income, employment, assets, and credit history. Once these documents have been compiled they will be sent to a lender who will then review them before giving approval or denial for the home loan application.   This post is designed to give an Australian audience information on how they can get home loans pre-approved so that their dream of owning their own home becomes less difficult!

What is Home Loan Pre-Approval?

Home loan pre-approval is  a step home loan applicants take before they begin their home buying process. It involves compiling documents that show evidence of income, employment, assets, and credit history.   It helps people by giving them an idea of what they can afford and how much home they can qualify for, while also speeding up the home buying process. A pre-approve loan also gives borrowers a chance to discuss their loan options with a lender and also gives buyers leverage against sellers.   While the process does require a lot of preparation, it can save a lot of stress for the future. You can also save a serious amount of time on finding the right lender through Joust mortgage marketplace, which is a tool that allows lenders to bid for your home loan by providing the best possible rates.    To help you further prepare for your application, here’s 4 documents that you should compile. 

Evidence of Income

Your evidence of income is one of the documents needed  for a home loan pre-approval. It can come in the form of pay slips, bank statements, or a letter from your employer.   Your lender will want to see that you have a steady income and can afford to make monthly mortgage repayments. If you are self-employed, then you will need to provide your accountant’s letter or tax returns. This document shows that you have been making a consistent income and proves that you can afford the repayments on a home loan.

Evidence of Employment

Your evidence of employment is another important document for home loan pre-approval. This can come in the form of payslips, a letter from your employer, or an employment contract.   Your lender will want to see that you have been employed with the same company for at least two years and that you are currently working full-time. If you are not currently working full-time, then they may require a letter from your place of employment stating that they are aware you are looking for home loan pre-approval and will be working full time in the future.

Evidence of Assets

Your evidence of assets is another important document needed when applying for home loan pre-approval. This can come in many forms depending on what type of home you want to buy.   For example, if you are looking to purchase a home with a mortgage then your lender may want to see evidence of funds such as bank statements or share certificates.    If you are buying a property off the plan, then your solicitor will need to provide an updated certificate of title showing that you have paid the deposit. This document is important for home loan pre-approval because it proves that you have the money needed to buy a home and your assets will not be used as security against the home loan.

Credit Report

Your credit report is an extremely important document when applying for home loan pre-approval. There are a range of different credit providers, such as Equifax or Experian, and each has their own scoring system.    Your home loan lender will require this document to verify your credit history and show that you are responsible with money. They will want to see all outstanding home loans, personal loans, car loans, store cards etc…On top of this they may also request a rental payment history report from the past 12 months.   If you have any bad credit listings such as defaults, late payments or loan applications then they may ask for a letter of explanation. This document is very important when home loan pre-approval because it verifies your history with money and shows what type of person you are in regards to financial responsibility.   Following these instructions will make home loan pre-approval much easier for you when applying for pre-approval. Preparation is always key to success, so make sure you are well-organised by compiling all these documents effectively and efficiently.