Pre-Approvals, are they as helpful as they sound? Firstly, let’s just see what Pre-Approval actually means.
Lenders will tell you to apply to them for a pre-approval which sounds like you’re sorted before you go house-hunting. But it literally means ‘at a stage before approval’, so, pre-approval creates no obligation whatsoever on the lender and no real rights to you as the potential borrower.
In fact, one of the most common phrases I hear from first home buyers is ‘The bank pre-approved me for a loan but when I found a house they said no!’ which can be very disappointing.
But if they are done correctly, they are invaluable!
Some lenders get you to fully apply for a loan whereas others simply provide a preliminary review by an experienced adviser.
The difference when you make a full application for a loan is that the lender will make an enquiry on your credit file, which is recorded. This can then make a difference if you start to shop around (see my blog credit file). A preliminary review does not.
Unless you’re sure that you’ve got the right lender, and the right home for you – don’t make a full application.
So why do lenders and advisers recommend a full application? Usually so that you’re locked into them and it’s easier for you to stay with them rather than shop around – even if they don’t have the best deal for you. Or, the adviser may not have the experience or the confidence to give you an answer just from a preliminary review.
Lendfirst Home Loans will never make a full application until we know it’s the best thing for you, and certainly not for a pre-approval. We have lots of experience and the confidence to give you a reliable guide before you start house-hunting.
Key Points
- Don’t make a full loan application when you only need a pre-approval
- Be cautious if someone insists that you make a pre-approval application with one specific lender
- Talk to Lendfirst for honest and reliable information and support
