Can my pre-approval change?
With changes to the Credit Contracts and Consumer Finance Act (CCCFA) now here, many home buyers are wondering where they stand with changes to bank lending criteria.
Often buyers don’t realise that a pre-approval is given for a short time only, and if this time is surpassed then a new pre-approval is required. Due to the changing bank criteria, this means some buyers can be left high and dry without pre-approval if they don’t meet the new criteria.
Where this can really cause issues is when buyers are building a new home. With labour shortages and supply chain challenges, builds are frequently running over time, and if it runs over the pre-approval buyers run the risk of losing their finance if they don’t qualify for a new pre-approval.
If a bank is forced to change its lending criteria due to new restrictions imposed by the Reserve Bank, then they have no choice but to enforce those upon lenders. Some of these criteria can include LVR’s, debt-to-income ratios, income requirements, the ability to repay, and credit laws. If buyers have been pre-approved within a relatively tight margin, then a change in one of these factors can be the difference between approval or not.
With many builds taking up to 18 months to 2 years to complete due to supply chain issues and lockdowns, it’s never been more important to ensure a lengthy pre-approval is in place. This is where a mortgage advisor comes in. We can help ensure you have a longer pre-approval in place, and will work with you during the build to ensure that the application remains current and we are reapplying (if needed) well ahead of time. This gives us additional options, and we have a number of lenders to choose from. In the worst case scenario where a pre-approval is not extended, it gives buyers plenty of time to make alternative plans including reselling the property.
When it comes to building loans, it’s important to get the right advice. If you are looking to build, give us a call today and we can help choose the right finance for you.