Preapprovals can be a funny thing.
Many borrowers that have been around for a while will believe that conditional or preapproval is a reasonably solid document, that has had substantial thought, assessment, and LENDER decision making put into it.
However not all preapprovals are created equally, and unless your bank or broker knows what they're doing, and informs you appropriately, you could be going to auction or to a unconditional purchase contract with a preapproval that is not worth a whole lot.
Increasingly lenders are moving away from doing proper preapprovals. What is a proper preapproval you ask:
All supporting documentation has been scrutinised and assessed
The lenders’ automatic credit scoring system has provided a system approval
The point of starting this information thread, is to make borrowers aware that there are significant variations in what a preapproval actually is. In some cases a preapproval is no more than system “approval” of data placed into the lenders’ origination system by the broker /banker staff or outsourced processing teams.
I have had circumstances of where we have had to really struggle toget a preapproval through to formal, where somebody has suddenly decided to look at the provided information in more detail.
I say this into because there are a lot of “new” and “attractive” lenders coming onto the market, that are very good at placing their offering with less experience brokers, either because their serviceability is really excellent or because there product offering is really well priced, but few “newish” transactional brokers will have an understanding that different preapprovals with different lenders mean very different things.
As a general guide, if your loan only services with a top quartile lender, or your loan is more than 80% loan to valuation, you'd need to ensure that your preapproval is sufficiently robust before going to auction or to a unconditional purchase contract.
As lenders look for increased efficiencies through their sausage Factories, my guess is we will see more releases like the one below today from Mac Bank. The implication doesn’t look to bad, but like all things of this nature, until it BECOMES personal for the borrower and/or broker, its just another piece off fluff.
ta
rolf
To ensure that we are able to focus on the mortgage assessment for your clients where you have submitted a full loan application, we have made the following changes to the pre-approval process effective immediately:
• pre-approvals will be assessed solely on the information within the loan application (including the required credit checks)
• supporting documentation provided will not be reviewed as part of the assessment until security property details have been provided to us.
Under this new approach for pre-approvals, we will continue to provide you with written confirmation of the pre-approval. This confirmation remains valid for 90 days.
Many borrowers that have been around for a while will believe that conditional or preapproval is a reasonably solid document, that has had substantial thought, assessment, and LENDER decision making put into it.
However not all preapprovals are created equally, and unless your bank or broker knows what they're doing, and informs you appropriately, you could be going to auction or to a unconditional purchase contract with a preapproval that is not worth a whole lot.
Increasingly lenders are moving away from doing proper preapprovals. What is a proper preapproval you ask:
All supporting documentation has been scrutinised and assessed
The lenders’ automatic credit scoring system has provided a system approval
- A human has overlooked the file( which is what you would expect as the outcome from step one)
- Where mortgage insurance is involved, and the lender does not have their own DUA(delegated underwriting authority- meaning they can improve their own insurance in-house), YOUR loan application should have been passed mortgage preapproval
The point of starting this information thread, is to make borrowers aware that there are significant variations in what a preapproval actually is. In some cases a preapproval is no more than system “approval” of data placed into the lenders’ origination system by the broker /banker staff or outsourced processing teams.
I have had circumstances of where we have had to really struggle toget a preapproval through to formal, where somebody has suddenly decided to look at the provided information in more detail.
I say this into because there are a lot of “new” and “attractive” lenders coming onto the market, that are very good at placing their offering with less experience brokers, either because their serviceability is really excellent or because there product offering is really well priced, but few “newish” transactional brokers will have an understanding that different preapprovals with different lenders mean very different things.
As a general guide, if your loan only services with a top quartile lender, or your loan is more than 80% loan to valuation, you'd need to ensure that your preapproval is sufficiently robust before going to auction or to a unconditional purchase contract.
As lenders look for increased efficiencies through their sausage Factories, my guess is we will see more releases like the one below today from Mac Bank. The implication doesn’t look to bad, but like all things of this nature, until it BECOMES personal for the borrower and/or broker, its just another piece off fluff.
ta
rolf
To ensure that we are able to focus on the mortgage assessment for your clients where you have submitted a full loan application, we have made the following changes to the pre-approval process effective immediately:
• pre-approvals will be assessed solely on the information within the loan application (including the required credit checks)
• supporting documentation provided will not be reviewed as part of the assessment until security property details have been provided to us.
Under this new approach for pre-approvals, we will continue to provide you with written confirmation of the pre-approval. This confirmation remains valid for 90 days.
