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Beware of the Online
or Instant
Pre-approval
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Imagine getting pre-approval
from your lender either over
the phone, online or even at
your local branch and to
find out that once you have
made your purchase your loan
was not accepted.
To often I have heard these
cries from bewildered
borrowers not understanding
the very reason why their
loan was no accept once it
went through the full credit
process. The problem here is
part lender and part
borrower.
The reasons why getting
instant approval can be
various but let me mention
just a few;
- The borrow miscalculates
their actual income. Some
lenders will not take into
account over-time or casual
jobs unless they have
received this income for
over a two year period.
Therefore, the maximum
amount you can borrow may be
significantly less than what
you need to make the
purchase.
- Online systems may not
pick up credit defaults held
against your name. Having
credit defaults can
significantly reduce your
chances of your loan being
accepted
- The purchased property
falls outside the lenders
policy and the borrower may
need to come up with a
greater deposit.
- Self employed applicants
may not be accepted because
they have not had their ABN
registered for a minimum of two years and
or registered for GST.
- Self employed applicants
are generally assessed on
the average of two years
income and not the current
year. Therefore,
inaccurate reporting of
income may lead to a lower
borrow amount
The best way to legitimately
apply for a genuine
pre-approval is to have your
entire application assessed
by the lenders credit
officer. This means
supplying the application
and all the supporting
documentation required for
assessment. Once assessed
and you are granted
pre-approval, only then can
you be reasonably confident
that your loan will be
accepted when you make your
purchase.
The only reason why your
application would be
rejected if your financial situation
changes, you purchase a
property that is not within
the lenders guidelines or
you purchase a property that
is significantly lower in
value than its actual
purchase price.
Depending on the lender it
normally takes 24 to 72
hours to assess your
application and make an
offer. Also, pre-approvals
can be valid for 3 months to
one year.
So forget about the instant
online, over the phone or
the bank pre-approval
because they are not worth
the paper they are written
on. Get you application
fully assessed to avoid
future disappointment.
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