Your approval may be withdrawn!
Has your home loan been pre-approved? Did you understand that a bank has the right to decline your application when you find a property to buy? This is because pre-approvals are “indicative” only, they aren’t a formal commitment to approve your loan.
Unfortunately, it’s quite common for people to get a pre-approval from their bank, win a property and find at auction, only to have their loan approval withdrawn when they request an unconditional approval.
The person buying the property then goes into a mad rush to find another lender to approve their loan or to get a family member to help them before they lose their 10 % deposit.
What are the conditions.
Pre-approvals have conditions that must be fulfilled, before the loan becomes formally approved.
Below is an example of a pre-approval letter that lists the conditions that need to be met.
This conditional approval is valid for a period of 90 days from 01/01/2010. Subject to the following details being confirmed, we’ll send the applicant a loan offer:
That all information supplied to us for assessing your client’s eligibility is true and correct.
That we have received all documentation necessary to verify your client’s deposit, security, assets, liabilities and income.
Verification of your client’s financial and personal details.
Our satisfactory assessment (including a valuation) of any property offered as security for your client’s loan(s).
Whether Lenders Mortgage Insurance is required. If it is required (generally when the loan amount is for more than 80 % of the value of the security property) the loan(s) will be provided only if the insurer agrees to provide the insurance. Your client will also need to pay the Lenders Mortgage Insurance premium.
Please note that this response doesn’t constitute a Loan Offer that your client can accept.
No further processing is provided at this stage– please retain all supporting documentation until you’re ready to convert to an unconditional approval.
As you can see, the lender hasn’t actually assessed the home loan application! The details have been entered in their system and the loan appears acceptable.
A reliable pre-approval has far fewer conditions and has been assessed by a credit officer that works for the lender.
Has your home loan been pre-approved? This is because pre-approvals are “indicative” only, they aren’t a formal commitment to approve your loan.
If it is required (generally when the loan amount is for more than 80 % of the value of the security property) the loan(s) will be provided only if the insurer agrees to provide the insurance. Your client will also need to pay the Lenders Mortgage Insurance premium.