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What's a pre-approval & how does it work?

In our line of work, we talk about "pre-approval" a lot - but what does it actually mean for you?

Put simply, a pre-approved loan is when a bank provides an offer for you where they agree to lend you a certain amount, providing you can meet the requirements they have.

After the first chat we have with you, whether this is over phone, email or in person, we'll discuss the information you need to get pre-approval, and will normally work towards this initially, to give you some certainty around the amount you can borrow.

This number will guide your house hunting price range. You then know that if the right house comes up, you have the confidence to make an offer, and the process from there is much more streamlined and easy once you have an offer signed, because the bank has already agreed to lend the money you need. 

Once you have a pre-approval, we’ll start meeting the conditions with you. This will be extra information required before they can make a final decision to agree to lend you the money. Things like evidence of your Kiwisaver funds or your Home Start Grant are very common conditions, along with a Registered Valuation if you’re borrowing more than 80%. Sometimes banks will need to see further evidence of your income, or confirmation that you're receiving income from a boarder or flatmate. Usually these conditions are quite easy to tick off and we’ll be there to help and explain what we need in your terms.

In most cases, even once you’re pre-approved you may need a finance condition when you make an offer on a house, especially if you have Kiwisaver and/or the Home Start Grant. We can help guide you on this along with your lawyer, and make sure it’s in plenty of time to meet your finance deadlines.

A pre-approval is a really useful way to gain certainty, prior to making an offer - we strongly recommend you take this path so you know what you're working with and what you can afford.

Contact us today to find out how we can get you pre-approved for your first home.

Claire Martin, Adam Thompson and the My Mortgage Team