Before you even start browsing homes, one of the most important, yet often skipped, steps is getting pre-approved for a mortgage. Doing this early can make the home search much smoother, help you understand what you can truly afford, and give you an advantage when making an offer in today’s fast-paced market.


In this article, we’ll explain why mortgage pre-approval matters and how it sets the stage for a more confident and successful homebuying journey.


What is a Mortgage Pre-Approval?


A mortgage pre-approval is an initial assessment done by a lender to determine how much you’re eligible to borrow for a home loan. This process includes a detailed review of your financial information, such as your income, assets, debts, and credit history. If everything checks out, the lender will issue a pre-approval letter, which shows the loan amount you’re conditionally approved for.


Why Pre-Approval Matters


Getting pre-approved before you start house hunting offers several key advantages. First, it helps you set a realistic budget. With a pre-approval letter in hand, you’ll know exactly how much you can afford, allowing you to focus only on homes within your price range. This saves you both time and energy by eliminating properties that are financially out of reach.


Another big benefit is that it can speed up the buying process. Once you find a home you love, having pre-approval shows sellers that you're a serious buyer who’s already been vetted by a lender. This can make your offer stand out, especially in a competitive market, and give you an edge when it comes to negotiating and closing the deal.


How Do I Get Pre-Approved?


To get pre-approved, the first step is to shop around and compare different lenders. Once you’ve chosen the one you feel comfortable with, you’ll need to complete a loan application. As part of this process, you’ll be asked to submit key financial documents, typically your W-2s, bank statements, tax returns, and a credit report. These help the lender determine whether you can afford to repay the loan.


Lenders assess your application using what’s known as the 4 C’s: capacity (your ability to repay), capital (your savings and assets), collateral (the property itself), and credit (your credit history). If you meet the criteria, you’ll receive a pre-approval letter stating the amount you’re qualified to borrow.


It’s also smart to speak with more than one lender before deciding. Each one may offer different terms, and comparing options can help you get the best deal.


How Long Does Pre-Approval Last?

Most pre-approvals are valid for about 90 days, although some lenders may extend that period up to six months. Because pre-approval requires updated financial documents and possibly a credit check, it's best to apply when you’re serious about buying a home. Otherwise, you may have to reapply and go through the process again.


Are All Pre-Approvals the Same?


Not quite. There are two types of pre-approvals, system-generated and fully assessed.


System-generated pre-approvals are quick and often issued almost instantly. They’re based on basic information and automated checks. However, they don’t involve a detailed review by a credit assessor and typically come with many conditions. These are more of a preliminary estimate.


Fully assessed pre-approvals, on the other hand, require more documentation and undergo a full review by a credit assessor, and in some cases, by the lender’s mortgage insurer if your loan-to-value ratio (LVR) is high. While they take longer (a few days), they’re far more reliable and come with fewer conditions.

Keep in mind that a full pre-approval will trigger a credit check, which can impact your credit score. That’s why it’s not advisable to apply for pre-approvals with multiple lenders at once.


Don’t Change Jobs Just Yet


If your employment or financial circumstances change after getting pre-approved, your pre-approval can become void. For example, switching jobs during this period could affect your loan eligibility. So, if you're planning to buy a home soon, it's best to hold off on major changes until after you've secured your mortgage.


I’m Pre-Approved — Now What?


Getting pre-approved is a big step, but it's not the finish line. The amount listed in your pre-approval letter is the maximum your lender is willing to loan you, not necessarily what you should borrow. It’s important to stay within a price range you feel confident and comfortable repaying.


As you begin house hunting, keep in mind that pre-approval letters don’t last forever. Most are valid for 30 to 90 days, so be sure to talk with your lender about your expected timeline. If you think your search might take longer, plan so you’re not caught off guard needing to reapply or submit updated documents down the road.


If you’re looking for affordable houses for sale in Inner West, Pilcher Residential can help you find your dream home!