How Long Does It Take To Get Pre Approved
We all know that we should and need to get pre approved when buying property. This is true even if you are a first home buyer or buying your first investment property. So, how long does it take to get pre approved? below is a brief guide. Always seek financal advise as each and every person is unique.
Why you should get pre approved when buying property?
Well, first it gives you confidence that you can purchase a property up to a certain price, secondly, it will give you better negotiating power when there are multiple buyers on the same property. Huh? How does that work, well let’s say that there is another buyer placing in an offer on the same property, but that buyer doesn’t have finance in place and will need 10 working days for finance.
In your case, you’re pre-approved and you can have it subject to 3-day working finance. (A tip, even if you are pre approved, it’s typically subject to conditions and one of the standard conditions is the bank needs to approve the property first because the banks want to know the security (property) is safe i.e. not a leaky building). If you're going to auction, then you'll need to have an 'uncondtional' approval, rather than a pre approval offer.
That was a bit of a detour, the pre approval process with the banks typically take between 5-7 working days. However, due to COVID-19, the bank staff are working more from home and it’s now taking between 10-15 days for them to turn things around. But if you’ve got a LIVE offer which means a signed Sales And Purchase Agreement, which states a subject to finance of say 7 working days. The bank will prioritise your application and put urgency on it. When it’s a live application, then you’re not going for a pre approval it’ll be an approval process.
What do you need to do to get pre-approved with New Zealand Banks?
Ideally, you should contact the main bank you bank with. It will be easier and quicker, most banks are very competitive in pricing. However, each bank assesses things differently. For example, one bank will pre-approve you for $600,000 but another will approve you for $750,000. That is a big difference and part of the reasons is that each bank has its own set of rules when assessing their customers for pre approvals.
A typical mortgage application for pre-approval will require the following:
Deposit: You’ll need to show proof of deposit, this can come from equity in your current home, savings, Kiwisaver, First Home Buyers Grant, Government assistance and gifting.
I've written a blog on 5 pitfalls of getting your First Home Buyers Grant if interested.
Income: Latest 3 payslips or if you’re self-employed 2 years financial statements.
Expenses/Debt: Typically will require 3 month bank statements and the below
- Student loans - Even though it is interest-free, this is a financial commitment. Therefore it is factored into the assessment.
- Automatic payments - such as Insurances, power bills, etc
- Daycare expenses or Child support
- Credit Card Limits
- Hire Purchases
- Personal Loans
- Car Loans
- Any Short Term Loans
- Store Cards
Once, the information has been gathered. Your financial adviser will advise you, document and compile ready for submission to the panel of lenders that they have. Before the submission, they should let you know why they’re submitting it there and it should be right for your financial position!
How long does it take to get pre-approved from the banks?
Once the application is submitted to the lender or banks such as ANZ, ASB or Westpac. They will prioritise it in their system. If it’s a straight forward deal, then typically 5-7 working days. But if there is information missing or extra information required then they’ll contact your mortgage broker/financial adviser and let them know.
The bank will then send the ‘approved’ pre-approval to your mortgage broker/financial adviser. They will then notify you that you’re PRE APPROVED.
They should also run through the pre approval with you and outline any conditions so that you’re aware of what needs to be met.
ANZ has acutally written a fanastic guide book here if you're interested.
You can how house hunt happily knowing that you’ve got finance ready.
How long does the pre approval last?
Typically pre approvals last anywhere between 60 days to 90 days from the date of approval. This is dependent on the bank you go to.
What happens if my pre approval expires?
You haven’t found a property you like and your pre approval is about to expire, what now? The good news is that you can get it extended. Your mortgage broker/financial adviser should have already informed you that they will get the pre-approval extended for a further 60-90 days.
After the first extension, depending on which banks, you may need to provide further information such as payslips and bank statements. Again, your broker/adviser will advise you on this.
How Should I Get My Pre Approval - Bank Or Financial Adviser/Mortgage Broker?
I am for one, always going to vouch to go down the adviser path. Not because I am one, but because getting the right advice and deciding on which bank is more suitable for you will save you a lot of time and money! Plus the convience, who wants to go into banks during their weekends off after a long week at work.
I'd rather spend it with family and friends and leave it to the experts. But I'll dive into more detail on a comparision between going direct to a bank or using a mortgage broker or a financial engineer like me!
Hopefully, I’ve given you some insight on how long it takes to get pre approved in New Zealand. If you want to get more information, feel free to contact me and I’ll see how else I can help you.
Getting pre approved at the right bank will save you a lot of money and time. It’s not all about the interest rates, as all banks are going to be similar it’s about how you structure your loan.
You can send me an e-mail at will@simplyfinance.co.nz or just book in a no obligation call with me below.
Good Luck!