What’s the Deal with Pre-Approval?

Pre-approval used to mean your entire financial profile was fully assessed before being granted the go-ahead. Lenders would examine your income, debts, and other details, so once you found a suitable property, formal approval was a breeze.

However, things have changed since the property boom. Now, lenders rely more on algorithms for pre-approval, which only check basic servicing ability. As a result, only 40% of pre-approved applicants move to full approval, leaving many declined at the final stage.

This is where a Mortgage Broker becomes invaluable. They’ll fully assess your finances upfront, giving you a clearer picture of your borrowing power before you even start property hunting—saving you time, stress, and potential disappointment.

Are you in the market to purchase property but unsure where to start when it comes to financing? Should you head straight to a bank or work with a Mortgage Broker? Let’s break it down for you.

Bank vs. Mortgage Broker: What’s the Difference?

Every lender has unique policies on what they require to approve a loan. If you approach a bank directly, you’ll need to fit within their specific criteria. A Mortgage Broker, on the other hand, has access to a range of lenders and knows exactly which policies each one follows. This means they can match you with the lender whose policies you fit, streamlining the process and increasing your chances of approval.

Do Big Banks Offer Better Interest Rates?

Not always! While the "Big 4" banks are well-known, they also have high overheads—paying for staff and maintaining physical branches. Smaller lenders, without these expenses, often offer more competitive interest rates, helping you secure a better deal.

Protecting Your Credit Score

Applying for pre-approval directly with a lender and getting declined at formal approval stage can negatively impact your credit score. A Mortgage Broker helps avoid this by reviewing your situation first, ensuring you’re set up for success before applying to lenders.

What Does a Mortgage Broker Cost?

Good news! Mortgage Brokers typically don’t charge clients for their services. Instead, they receive their fee from the lender once your loan application is successfully processed.

What Else Can a Mortgage Broker Help With?

Mortgage Brokers can help tidy up your finances before submitting your loan application. For example, did you know lenders view credit cards as fully drawn, even if you barely use them? Every $1,000 in credit can reduce your borrowing power by $5,000. A Mortgage Broker will check for any forgotten or unnecessary credit cards—like that old GE card you used for an interest-free purchase—and advise you to close them, maximising your borrowing capacity.

Additionally, if a lender discovers missed details (such as a forgotten credit card), they may require a deeper dive into your finances, slowing down the approval process. A Mortgage Broker helps ensure no stone is left unturned.

Already Have a Home Loan but Want to Invest in Property?

If you already have a mortgage and are considering buying an investment property, your first call should be to a Mortgage Broker. They can assess whether your current home loan is on the best interest rate available, potentially helping you refinance and free up more cash to support your next investment.

In Short

If you’re looking to buy real estate and need financing, a Mortgage Broker should be your first point of contact. Not only can they help you secure the best deal, but they’ll also streamline the process and avoid unnecessary hits to your credit score.

At First National Real Estate Bundaberg, we proudly work alongside Jason Bills from My Castle Lending, who joined us on the latest episode of our Bundaberg Property Pulse podcast. He dives deeper into all things mortgage-related, so be sure to check it out!

Want to chat with Jason about financing your property purchase? Reach out to him here mycastlelending.com