Do I need multiple mortgage pre-approvals?

Getting pre-approved for a mortgage can help narrow down your property search considerably, as you’ll have a firm budget in mind while you go house hunting. Additionally, being pre-approved for a mortgage puts you in a better position to negotiate a price at an auction. 

However, a pre-approval (or conditional approval) is just a preliminary step in the mortgage application process. It’s not a guarantee that your mortgage application will be approved but simply an indication that your application is in line with the lender’s criteria. That being said, a lender who has already pre-approved you for a mortgage based on your income and credit standing may be more likely to grant you a formal approval, unless the property’s valuation comes back short or there’s a significant change in your financial situation. 

Two types of mortgage pre-approvals

There are two types of mortgage pre-approvals you can apply for. Both require you to submit a complete application with some supporting documents, like your payslips and bank account statements. What is different is the way the information is assessed by a lender. 

If you’ve applied for a system-generated pre-approval, your supporting information will not be assessed in-depth by the lender. This kind of pre-approval can be received instantly or within a few hours. However, it has several conditions attached to it, as it’s entirely based on the information entered by you into a system that has yet not been validated by the lender. You may use this type of pre-approval to get an initial indication of the amount you might be able to borrow without affecting your credit score.

A full assessment pre-approval may take a few days to be issued, but it could save you a lot of time at the time of the final approval of the mortgage. This type of pre-approval includes a full assessment of your documents, as well as a credit check, making it more reliable compared to a system-generated pre-approval. Most lenders will only grant you a pre-approval once they are satisfied with the information you have provided. 

It’s important to remember the pre-approval is still conditional in nature. It is subject to an acceptable valuation of the property you intend to buy and to no material changes in your financial information at the time of final approval.

Once issued, your pre-approval is only valid for a fixed period, generally between three and six months. If you don’t find a suitable property in this period, you may have to reapply for a pre-approval or seek an extension from your lender.

Getting multiple pre-approvals for a mortgage

While it’s helpful to apply for a pre-approval before making an offer on a property, making multiple pre-approval mortgage applications can be harmful. Every time you apply for a mortgage pre-approval, the lender runs a credit check that leaves an inquiry on your credit file. Too many applications for credit in a short period may impact your credit score, which will eventually affect your ability to secure finance. Besides, multiple pre-approval mortgage applications might lead a lender to believe you’re experiencing financial problems, which could reduce your chances of getting approved.  

While you may want to compare figures from multiple lenders, it may be better to get pre-approved by only the lender you want a mortgage from. Instead of making multiple pre-approval mortgage requests, you can seek help from a mortgage broker in picking the right home loan with suitable features and a competitive rate. While the pre-approval process is pretty straightforward, a good broker may make it seamless with professional advice and handholding throughout the process and even after the loan is finally approved and disbursed.

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