What is a pre-approval and why is it important?

How it works

The pre-approval process will vary slightly depending on the processes of each lender and individual mortgage brokers. We will be taking you through the process with a Beck McLean Finance broker, however, these steps will largely be similar across lenders and other mortgage brokers.

Financial assessment

In order to review your financial situation,you will need to supply the following documentation at a minimum:

Category 1 (one of the following current identification documents):

If you are an Australian Citizen:

• Australian birth certificate
• Australian passport
• Australian citizenship certificate

If you are a citizen of another country:

• Current passport
• Evidence of permanent residency or permanent residence visa, including the date on which it was granted

A New Zealand citizen (must be living in Australia once a property has been purchased):

• Current passport

Category 2 (one of the following current identification documents):

• Australian drivers licence
• Passport (if not used for Category 1)
• Working with Children Check card
• Firearms license
• Proof of Age card issued by Liquor Control Victoria

Category 3 (one of the following current documents that demonstrate you reside in Australia):

• Medicare card
• Motor vehicle registration notice
• Centrelink or Department of Veterans' Affairs Cards

Proof of income

• 2 payslips dated within the last 3 months (for PAYG employees)
• For other types of income such as self-employment, child support payments, maternity leave, etc.. the proof of income required will vary between which lender you apply with. Some form of tax return, or accountant letter will generally need to be provided.

Bank statements

• 12-months of bank statements from all accounts, at Beck McLean Finance we will supply you with a secure, digital link that will send your bank statements to us once you’ve completed the required steps. If you bank with multiple banks, you will need to complete this step multiple times.

Assets, liabilities, and expenses

• At Beck McLean Finance we will send you a link that directs you to our customer relationship system for you to input your assets (genuine savings,superannuation, cars, etc), liabilities (credit cards, car loans, personal loans, HECS, etc), and living expenses.
• Your living expenses are based on the expenses you will incur after your loan is successful. For example, if you’re currently renting but will purchase a home to live in, rent will not be an expense as you will now have owner-occupier expenses.
• If you have any liabilities, we will also require additional statements from the lender, which you may have already provided in your bank statements. If not, we’ll reach out to you. It’s good to note that if your figures are slightly off, that’s okay! We’ll thoroughly check all inputted data to ensure it’s accurate.

Credit check

• In order to complete a credit check on your behalf and provide financial assistance, we will send you a Credit Guide and Privacy Statement documentation to digitally sign beforehand.
• A credit check will allow us to see your debts (current and past), including any problems you may have experienced when repaying them, and your current credit limits on these debts. A credit check will help assist us in deciding which lender is most suitable your financial situation.

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Application process

Once we’ve assessed your financial situation, we’ll be able to determine your maximum loan amount and purchasing price. Generally, additional information will not be required, however, we’ll touch base throughout the process to keep you in the loop.  

When your application is successful, you’ll be granted conditional approval which allows you to house hunt with a realistic budget in mind. In general, pre-approvals are valid between 3 to 6 months and can be renewed if expired. However, it’s important to note that if you are renewing a pre-approval your initial interest rate is not guaranteed and may fluctuate.

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You're ready to buy

So you’ve bought a property, what’s next? Obtaining formal approval with a pre-approval in place is relatively straightforward for most buyers. We will assess that your financial circumstances have not changed, complete a valuation of the property, and require additional documentation to add to your application, including:

• Section 32 - Contract of Sale
• Home insurance (this will be required slightly later)
• Additional documentation such as First Homeowner Grant papers, etc.. may be applicable

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Obtaining a pre-approval is a helpful step for any prospective home buyer in Australia. It provides a clear understanding of your borrowing capacity, enhances your credibility in the market, and streamlines the home buying process. With a pre-approval, you can confidently negotiate with sellers, make informed financial decisions, and potentially speedup your path to home ownership.