What can make a bank deny loan after preapproval

[malayali]

hello
I am trying to sign a contract for a property which does not have a cooling off period before Christmas... The agreement is to pay 10% deposit... Now I have managed to get preapproval from couple of banks... but I haven't got an unconditional approval yet... I am trying to understand my risk here... if I go ahead and sign the contract now.. what are my risks here..? When can the bank turn around and say "no loan for you" after a preapproval...

 

[D.T.]

Preapproval means ****

 

[Chris B]

While there is no cooling off, surely you can include a finance clause to give you the time to get unconditional approval...

Pre-approval is done to give you an indication of what you should be able to borrow but it doesn't commit the bank to anything, so until you have an unconditional approval, you can't rely on it and there could be any number of reasons why the bank might change their mind.

Good luck

 

[mikezen]

Just communicate w your broker, he should be able to tell you what he likely hood of success w be, if he's half decent that is!

 

[Aaron_C]

You can never have 100% finance approval before you have bought since the bank has no security to lend against. Don't shop for preapprovals - go for the lender that will do the deal and that's it.

 

[Peter_Tersteeg]

Don't shop for preapprovals - go for the lender that will do the deal and that's it.

So true. By shopping around several banks you're actually doing yourself damage. The banks can see that you're making other inquiries and this will make them nervous, sometimes to the point of flatly refusing to give you finance.

If you want to shop around, go to a broker.

A pre-approval is usually a good indication that you'll get the finance but not a guarantee. Every pre-approval will be subject to the bank being happy with the property you eventually purchase and being satisfied that you're paying a fair value for it. The banks do reserve the right to reassess your application at any time and they can refuse fund the loan for any reason. In essence the loan isn't unconditionally approved, until it actually is unconditionally approved.

Some pre-approvals are not worth the paper they're written on. They do little more than assess the information submitted and don't cross reference it with your payslips or other evidence until it comes time for the full approval. You might as well not bother with these lenders.

I've also seen many lenders simply tell the customer that they've got a pre-approval and again the person in front of them has made a simple opinion without actually completing a pre-approval properly. I've seen a lot of people be told they've got a pre-approval when in essence the bank manager has not done anything other then give them his opinion. They then purchase a property only to be told that they can't get the loan. This tends to happen when you shop around and if the pre-approval takes only a few minutes or an hour to complete, you've been suckered.

If you really want a serious pre-approval that's going to stand up, see a broker, get decent advice, let them fill out an application for you and be prepared to wait a few days to get it in writing.

 

[Terry_w]

A loan agreement is a contract and it is not enter into until you sign the contract and the bank accepts/countersigns. I am not sure when this actually occurs - possibly when you sign the bank's loan agreements.

A pre-approval is not a contract and is not even an offer of a contract. It just means the bank will consider lending you the money.

 

[Aaron_C]

A pre-approval is not a contract and is not even an offer of a contract. It just means the bank will consider lending you the money.

An agreement to agree? Remember those?

 

[Brady]

So true. By shopping around several banks you're actually doing yourself damage. The banks can see that you're making other inquiries and this will make them nervous, sometimes to the point of flatly refusing to give you finance.

If you want to shop around, go to a broker.

A pre-approval is usually a good indication that you'll get the finance but not a guarantee. Every pre-approval will be subject to the bank being happy with the property you eventually purchase and being satisfied that you're paying a fair value for it. The banks do reserve the right to reassess your application at any time and they can refuse fund the loan for any reason. In essence the loan isn't unconditionally approved, until it actually is unconditionally approved.

Some pre-approvals are not worth the paper they're written on. They do little more than assess the information submitted and don't cross reference it with your payslips or other evidence until it comes time for the full approval. You might as well not bother with these lenders.

I've also seen many lenders simply tell the customer that they've got a pre-approval and again the person in front of them has made a simple opinion without actually completing a pre-approval properly. I've seen a lot of people be told they've got a pre-approval when in essence the bank manager has not done anything other then give them his opinion. They then purchase a property only to be told that they can't get the loan. This tends to happen when you shop around and if the pre-approval takes only a few minutes or an hour to complete, you've been suckered.

If you really want a serious pre-approval that's going to stand up, see a broker, get decent advice, let them fill out an application for you and be prepared to wait a few days to get it in writing.

Pete some agrees some disagrees.

Multiple applications is definitely not a good idea, banks don't like it.

Pre-Approvals can be very valuable, have had deals approved many times and credit offer has made comment that only still approved as previously said yes (have heard of it going the other way, but I haven't had that happen personally) can be useful with tricky deals to get an ok upfront from credit officer (using 1yr only of financials etc) also pending what state you're in can be very useful in your negotiation, I've found that SA REA love knowing and seeing a client with a pre-approval other states not so much. Guess way to look at it two people offer exact same price and conditions, one pre-approval other doesn't who do you go with?

Agree with the get decent advise this is extremely important, but just because they are a broker doesn't mean they have a clue. Just because they have multiple different banks they can send the loan application to means its going to get approved or be the right bank for you. I still am yet to have a application that I haven't been able to get approved that was approved elsewhere by a broker (I'm not doubting that it won't happen soon, but hasn't yet) which includes some of the larger known SS brokers.

End result make sure you trust the person you're dealing with, if you don't walk away.

 

[Peter_Tersteeg]

Hi Brady I'm essentially making the argument that by visiting every lender you could be doing damage to your credit report. If you put your name into a lenders system and they come back in 30 seconds with an answer, it's not a reliable pre-approval, but it is another hit on your CRAA. Enough of these and it does become more difficult to actually get finance.

I'm also just trying to point out that talking to someone for 20 minutes doesn't give you a pre-approval, it only gives you an opinion. A real pre-approval needs to be submitted to a credit officer and signed off at that level, not by the banker or broker.

I completely agree that you need good advice and not every broker will give the best advice. Nobody can be everything to everyone. Every broker and every banker has more than a few stories about how they've had to fix the mistakes of their competitors be they broker or banker.

Next time I'm in Adelaide or you're in Melbourne we should catch up. I think we've actually got quite a bit in common.

 

[Brady]

Hi Brady I'm essentially making the argument that by visiting every lender you could be doing damage to your credit report. If you put your name into a lenders system and they come back in 30 seconds with an answer, it's not a reliable pre-approval, but it is another hit on your CRAA. Enough of these and it does become more difficult to actually get finance.

I'm also just trying to point out that talking to someone for 20 minutes doesn't give you a pre-approval, it only gives you an opinion. A real pre-approval needs to be submitted to a credit officer and signed off at that level, not by the banker or broker.

I completely agree that you need good advice and not every broker will give the best advice. Nobody can be everything to everyone. Every broker and every banker has more than a few stories about how they've had to fix the mistakes of their competitors be they broker or banker.

Next time I'm in Adelaide or you're in Melbourne we should catch up. I think we've actually got quite a bit in common.

Agree with the multiple hits on credit file being bad. I'm always amazed by peoples lack of knowledge or should I say lack clear of information provided by bankers about what damage can be done. Along with the lack of information about structuring of loans. Luckily for me this usually works in my favor, as other banks spend 10-15mins and give them a bit of paper says max borrowing amount and best rate (which then they go shop around each bank for highest and lowest of each), whereas I talk about rate last as show them whats more important.

My issue was around this -

If you really want a serious pre-approval that's going to stand up, see a broker, get decent advice, let them fill out an application for you and be prepared to wait a few days to get it in writing.

Yes I find that we often have very similar thoughts on most approaches. Sounds like a good idea, let me know when you're over here next and I will do the same.

 

[Marty McDonald]

Brady your lucky your employer does real pre approvals ie a real person makes a credit decision (excluding the security property). Bankwest and many others do not do this!

In regards to your claim Cba can do anything any other bank can approve.... sorry but just not true especially for investors. Interest only loans assessed with P&I repayments means servicing wise there are a quite few lenders who would lend considerably more than CBA to your typical moderately to highly geared property investors like those who frequent this forum.

Granted for most other things god bless the CBA and I use them a lot because of their policy niches.

 

[Brady]

Brady your lucky your employer does real pre approvals ie a real person makes a credit decision (excluding the security property). Bankwest and many others do not do this!

In regards to your claim Cba can do anything any other bank can approve.... sorry but just not true especially for investors. Interest only loans assessed with P&I repayments means servicing wise there are a quite few lenders who would lend considerably more than CBA to your typical moderately to highly geared property investors like those who frequent this forum.

Granted for most other things god bless the CBA and I use them a lot because of their policy niches.

You're right Marty I often hear things that go on in other banks and I don't know if I could work elsewhere after being with CBA. Have recently had job offers from other banks and it's one of many reasons I've declined at this stage.

I did not make that claim at all Marty, I said that I haven't personally had a deal that I couldn't do that has been able to be approved by a broker elsewhere (that's including 'SS brokers'). Servicing is just part of the application, loans still can be approved with shortfalls, credit officers have the ability to use buffers in shortfalls... And different credit officers have ability to approve larger shortfalls I deal with the same credit officers on a daily basis. The credit manager and state manager know my name well.

 

[Marty McDonald]

I did not make that claim at all Marty, I said that I haven't personally had a deal that I couldn't do that has been able to be approved by a broker elsewhere (that's including 'SS brokers'). Servicing is just part of the application, loans still can be approved with shortfalls, credit officers have the ability to use buffers in shortfalls... And different credit officers have ability to approve larger shortfalls I deal with the same credit officers on a daily basis. The credit manager and state manager know my name well.

Sure thing Brady understand. I've had some policy exceptions approved by my CBA state head of credit too (for the right clients of course, little to do with me). Problem is time is usually so important that I will always choose to go with the lenders whose policy fits my clients situations without having to rely on exceptions which may or may not be granted depending on one persons point of view usually. Also by the time it's been up lined and down lined and sent to a file owner it's unconditionally approved a week ago somewhere else.

 

[Brady]

Sure thing Brady understand. I've had some policy exceptions approved by my CBA state head of credit too (for the right clients of course, little to do with me). Problem is time is usually so important that I will always choose to go with the lenders whose policy fits my clients situations without having to rely on exceptions which may or may not be granted depending on one persons point of view usually. Also by the time it's been up lined and down lined and sent to a file owner it's unconditionally approved a week ago somewhere else.

For me it's only a quick phone call to make sure on the same page along with few hours max to input everything with comments and submitted, not a week.

 

[Marty McDonald]

I don't want to tell you how to suck eggs Brady I'm only going off my experiences which I'm sure are different to yours. I was taking about a proper up lining here though when its not possible for the initial credit assessor to make the call (or they make an unfavourable one). Usually takes at least a few days to get an exception approved or decision overridden in my experience then a few more for uncon etc. I had one early in the year for example for a doctor client go all the way to my states head of credit via about 3 different seniority levels along the way which took a while. 90% LVR, LMI waiver, mining town, over a mil in loans with the bank and wanted all IO repayments not P&I.

Anyway getting off the original topic and getting late off to bed for me. Merry Xmas

 

[Brady]

I don't want to tell you how to suck eggs Brady I'm only going off my experiences which I'm sure are different to yours. I was taking about a proper up lining here though when its not possible for the initial credit assessor to make the call (or they make an unfavourable one). Usually takes at least a few days to get an exception approved or decision overridden in my experience then a few more for uncon etc. I had one early in the year for example for a doctor client go all the way to my states head of credit via about 3 different seniority levels along the way which took a while. 90% LVR, LMI waiver, mining town, over a mil in loans with the bank and wanted all IO repayments not P&I.

Anyway getting off the original topic and getting late off to bed for me. Merry Xmas

And I'm going off mine which are different to yours. No need to get offensive, you made comment that I said something which I didn't say - Its only fair that I correct you. Just like when felt the need to make comment to Pete that you don't need to only see a broker to get good advise and a good preapproval. It's not the case you need to see someone you can trust, has knowledge and most importantly can get the deal done in a timely manner, which I'm sure Pete agrees with. Often on this forum similar comments are made, usually by trusted/regular 'SS Brokers' which then get taken as the gospel - be it correct or not.

I was making comment that I deal with these people everyday. I don't have to go through each level of seniority level as these are people I have built relationships over time. Only time when I've had deal which required to get the multiple heads of state together is for a CAT 5 deal, which well pretty much doesn't happen. For >$1M 90% it's usually outside DUA, but with medico LMI waiver shouldn't be the delay with Genworth assessing the deal. Often find sometimes it's just as easy to set up P&I and change after settlement...

 

[Marty McDonald]

I wasn't going on the offensive Brady really wasn't just saying no lender can be all things to all people.

Now I am going on the offensive....I do find it hard to believe that you have the ear of your states head of credit within the hour. I am going to have to call BS there. Sorry that is not the way banks work.

 

[Brady]

I wasn't going on the offensive Brady really wasn't just saying no lender can be all things to all people.

Now I am going on the offensive....I do find it hard to believe that you have the ear of your states head of credit within the hour. I am going to have to call BS there. Sorry that is not the way banks work.

I didn't say that I can be all to everyone, you did. You keep saying that I'm saying things when I'm not...

Well believe or not I don't care Marty, I have no reason to lie. I don't promote myself on here, my number isn't here on in my sig trying to drum up business. I have written ~$70k of loans for SS forum members thats all, because they contacted me directly it was a semi complex loan with companies and trust but I did it just for the service factor, because thats what I do. You can call BS as much as you want but fact is deal with these people everyday, have had dinners and many drinks with some of these people, some of them know me personally.

 

[fullylucky]

HI Op,

i think what can make the bank not give you formal approval after giving preapprove is:

if you buy a house that's not worth what the bank think it's worth as they dont have security. eg. say you buy a 400K house for 700k...
if you lose your job between preapprovals and now.

if the bank doesn't formally approve your loan after preapproved your loan then threaten to share this on social media it might scare them into reconsidering? as they are care about their rep?

anyways if they don't approve the full amount surely they will approve some or an amount fairly close to the full amount. in this case you can just ask your parents or friends to make up the difference and get them to write a letter saying it's unconditional gift. then make sure you pay your friend or parents back first before paying additional repayments on your loan.

hope that helps.