Buying a home is an exciting time and you’ll quickly learn the steps and processes you’ll need to go through before you pick up the keys and move in. Pre-approval is one of the most important steps you’ll take, so knowing the basics will not only boost your confidence when making offers, but will also make sure you know exactly where you stand with your bank.

What is loan pre-approval?

A loan pre-approval means that a lender has agreed, in principle, to lend you an amount of money towards the purchase of your home but hasn't proceeded to a full or final approval. It allows you to know your maximum available funds so you can narrow your search, negotiate with more certainty, and bid with more confidence if you're going to auction.

A pre-approval is a valuable step in getting you closer to your new family home or investment property. It's not a requirement in the home buying process, but it can make life easier.

Explore home loan pre-approval online

What are the benefits of pre-approval?

If you're looking to purchase a house but you're not sure how much you can spend, it's difficult to know where to begin. You might find a property that seems perfect, but have no idea whether it's a realistic option for your budget.

If a lender pre-approves you for a loan, they will do so for a specific amount, so you can focus your house hunting on the properties you can afford. Which might mean that you have to forget about that beachside mansion with tennis court and pool, but the whole process will be a lot easier. It also means that, if you're bidding at an auction, you'll have a maximum bid in mind.

For example, you may be looking at two different properties: one valued at $550,000 and one valued at $700,000. If you're pre-approved for a home loan of $550,000, the more expensive house may be outside your budget, unless you contribute more of your own funds.

Pre-approval can also make you a more attractive buyer to a potential seller, as it indicates that you're serious about purchasing the property and that your offer is less likely to be withdrawn due to a lack of financing.

Are there drawbacks to a pre-approval?

There aren't any great drawbacks to obtaining a single pre-approval, but having several in a short period can potentially harm your ability to borrow.

Pre-approvals will be visible on your credit file as a loan enquiry, and having many in quick succession and with multiple lenders might create the impression that you're financially unstable.

While this shouldn't discourage you from seeking pre-approval, it does mean it's a good idea to wait until you're seriously considering a purchase, rather than applying early in the process when you might just be entertaining the idea.

If you’re not quite ready to apply, you can get an idea of how much you may be able to borrow using the Suncorp Bank Borrowing Limit Home Loan Calculator.

Does pre-approval mean that my loan is guaranteed to be approved?

No. While pre-approval means that you're more likely to have a loan approved, it doesn't provide an iron-clad guarantee. The following factors - among others - can affect whether a loan for which you've been pre-approved proceeds to final approval:

• Changes to your personal circumstances
• Changes to government regulations
• A negative valuation of the property
• A change in the property's condition

However, if your circumstances have not changed significantly and the property is acceptable by Suncorp Bank, your chances of obtaining final approval following a pre-approval are very good.

If you have any concerns about the approval process, you can contact Suncorp Bank or speak to your mortgage broker. If you'd like to speak to someone face-to-face about your lending options at a time and place that suits you, you can book an appointment with a Suncorp Bank Mobile Lender.

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Published 18 February 2021