By Guest Blogger, Louisa Sanghera, Principal Broker,
Zippy Financial
Many borrowers are complaining that banks have become slow to process pre-approvals. Why is this happening – and is there anything you can do to speed up your own pre-approval?
A home loan pre-approval means that a lender has agreed (in principle to lend you a specific amount of money towards the purchase of a property. But they haven't proceeded to a final or unconditional approval yet.
Getting a home loan pre-approval can be really valuable when you’re shopping for a property. In fact, getting a home loan pre-approval can be an absolutely essential prerequisite to getting serious about shopping in the property market.
It gives you confidence to buy and you know your limits and can bid at auction with a set budget in mind. Overall, it helps give you a budget to shop within, and gives you the peace of mind of knowing if your offer is accepted, you’re very likely to be approved for a mortgage.
So, what do you do if pre-approvals have become so difficult to get?
The great pre-approval shortage
The issue we have had this year has been that we have had many banks STOP doing pre-approvals. They’ve taken this action because they’ve been so overwhelmed with demand, they haven’t had the resources to service potential new borrowers.
The banks that have continued to do pre-approvals have therefore had to take on extra volume, which is making their response and turnaround times ever slower.
Driving this home loan demand has been the record activity the market has seen by active first-time buyers. Low interest rates have also meant existing homeowners have been refinancing for a better deal.
The final cherry on top has been the super low interest fixed rates, with fixed rates in particular falling to never before seen lows. This has encouraged a massive amount of people to apply to fix their rates.
Some banks got themselves into sticky situations during covid and lockdowns, as they had staff overseas in bulk call centres in India and the Philippines. They regions were hit hard by the pandemic, and it put an enormous amount of pressure on banks as they tried to equip staff to work from home in offshore countries. This led to slower service levels, too.
In positive news, some banks have since decided to bring their credit departments back to Australia, but it’s been a lengthy process of recruiting and training, so it wasn’t an immediate solution.
This all explains the ‘why’, but if you’re one of the unlucky borrowers who has applied for a home loan and you are slow to get approval, you can miss opportunities to buy at auction, secure a deceased estate or take action on a property for sale by motivated sellers who want a quick sale.
If this sounds like you, or you don’t want to pay more than you need to in a rising market so time is of the essence, getting fast pre-approval can happen. Here’s what you need to do:
• Be organised and prepared from the outset - this means getting your paperwork organised such as payslips and tax returns.
• Don’t start looking for a house until you’ve got your pre-approval. If you find your dream home it can add pressure as you feel compelled to act fast and make an offer, but this can add a lot of stress to the process.
• Work with a broker that understands efficiency and speed – if you delay getting documents to them, they are hamstrung, and your application cannot progress.
• Ask your broker to do the research for you – good brokers have exceptionally good systems AND good relationships with banks and their credit managers, so they can find you a bank that best suits your needs/has the fastest turnaround times.
• Most importantly: you can fast-track the process by being super organised on your end. If you get a list of the supporting documents required and provide everything correctly the first time to the broker, it can streamline the process significantly.
It’s also important to let your mortgage broker know if you need a fast turnaround time. Under best interests’ duty, it is a broker’s obligation to give you the cheapest 3 options for you, which are not the fastest loans.
Remember, brokers are on your side, so if there is some urgency, advise your broker: they will know the majority of the turnaround times for the banks and they can match you with the most suitable lender.
Louisa Sanghera - Director and Principal Award-Winning mortgage broker at Zippy Financial
Louisa created Zippy Financial after a 25-year career in banking, with the goal of using her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients grow their wealth through smart property financing. Whether you are looking to buy your first home, re-finance or build your property investment portfolio, Louisa and her team of experienced brokers can help guide you through the challenging maze of finding & securing exactly the right loan for you.
M: 0414083522 or 1300 855 022
E: louisa@zippyfinancial.com.au
Connect with Louisa Sanghera on LinkedIn
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