What documents do you need for a pre-approved mortgage?
Thinking of getting yourself your own home? Before you dip your toes into the mortgage pool, make sure you're ready to have your finances checked for a pre-approved home loan. Pre-approval is usually considered the first step toward purchasing a property, as it allows lenders to run a background check on potential borrowers to determine whether they will have the resources and the ability to pay back their mortgage. As a result, it can be a great way for prospective buyers to find out what sort of loan they can expect when it comes to financing their new home.
With that in mind, the bulk of this process is juggling paperwork to prove your financial capability and stability.
The Australian government laid out a personal identification system called 100-point check, where they’ve assigned a specific number of points to all the major personal identification documents to prevent cases of fraud. The idea, as far as mortgage approval goes, is that consumers should be able to provide at least 100 points worth of identification to fend off any doubts of mistaken/stolen identity or illegally borrowing money.
A regular source of income is a must if you’re looking for a pre-approved mortgage. You have to show that you are steadily, consistently employed: typically by remaining an employee of the same company for a certain amount of time, and that you are paid regularly.
Banks and other lenders are wary of mortgage seekers, and need to be assured that anyone they’re dealing with has good financial sense. More often than not, they will ask for your bank statements over the past three months, to review how your money flows in and out of your savings account.
Be honest when you declare your additional debts. Lenders take pre-existing debt into consideration when deciding if you are an ideal candidate for a home loan. As such, billing statements from credit cards and other loans should be submitted so that the lender will have a bird’s eye view of your expenses.
Make sure to give your bank a heads-up if you own other assets. If you happen to have real estate properties, you can provide a council rate as an evidence of your ownership.
It might feel obvious, but it's worth saying: Make sure to double-and-triple check the application form, and don't forget to sign it!
Once you’ve compiled everything together, pass it on to your preferred lender, who will look into your income and expenses. Provided that everything goes well, you can begin to look around for a new home, but make sure to act quickly, as most pre-approvals are only good for three to six months.
It's important to note that getting a pre-approved mortgage doesn’t guarantee unconditional approval from your bank for any property, as they have the right to refuse you depending on the property that you’re looking to buy. For example, the bank may not back small apartments, hobby farms, or a home in poor repair.
That said, once a bank (or other lender) has issued you a formal pre-approval for a mortgage,you can have the confidence to start really looking for a new home: Sellers will take you seriously because they know there’s a bank that’s ready and willing to back up your offer with the purchase price.