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Pre-Approval: Do I Need It?

<img src="https://cdn.sanity.io/images/3023m6wi/production/7d98218b3b850e2110499bde8f8934d7259458ff-1200x801.jpg?rect=0,63,1200,675&w=1200&h=675&fit=crop&auto=format" alt="Pre-Approval: Do I Need It?" />

Pre-Approval: Do I Need It?

‘Need’ is an interesting one. For most things other than air to breathe, water to drink, food to eat and a roof above ones’ head, you could argue nothing is a necessity.

However, that last one - a roof above ones’ head - is no easy thing to acquire. There are enough hoops and hurdles in the home buying process to give anyone a headache. This is where a pre-approval comes in.

Though by definition not ‘necessary’, a pre-approval is heavily recommended.

Before we go into ‘why’, though, let’s talk about what exactly a pre-approval is.

A pre-approval is, in short, a certain amount of money that a lender - usually a bank - is willing to lend you based on your current assets, income, etc. The ‘pre’ part is because that loan, that transaction, has not actually occurred yet. The lender is, in principle, committed to it though.

It is far from uncommon to feel lost in the home buying process. For most of us, this is one of the bigger commitments we’ve made in our lives. For most of us, this is the biggest purchase we’ve made in our lives. We’ll find our dream home and be entirely unsure if it’s a realistic purchase.


One thing a pre-approval does is give you a figure to work around. A lender will pre-approve for a specified amount. Once you’ve got that amount: say, $700,000, you now have stronger parameters to work within.

You can filter out houses over that amount and be confident in looking at houses within it. Also within the actual process of an auction, you’ll know exactly how far your bidding can go.


However, the real value in a pre-approval is the image it creates for you in a seller’s head. As a potential buyer in possession of a pre-approval, not only do you appear serious and financially secure, but you won’t create headaches down the track.

With a pre-approval, you become a tangible, integral step in the seller’s journey. We’ve all gone to an inspection at a house we’ll never be able to afford. It’s nice to dream.

But with a pre-approval, you’re showing that you’re serious, that you do have the means to buy, and that you at the very least are seriously considering this house.


It is important to note that while a great indicator, a pre-approval is not a full approval.

In some unfortunate instances, a pre-approval may be rescinded. Among others, these are the top factors that contribute to a pre-approval being reconsidered:

  • changes to personal circumstances: income, job, marital, etc
  • changes to government rules and regulations surrounding loans or properties
  • a change in the property that affects the sale or value in some way.

So, after all that, the question does remain - do I NEED a pre-approval? Our answer is, in short, yes you do need one.

Not only does it make you more appealing to sellers, but it gives you stability, peace of mind, confidence in bidding, clear limits to your spending and greatly informs your house hunting. It’s true that you may be able to buy a house without one - there are no rules saying you can’t - but why bother with so much unnecessary headache?

If you can make this daunting, complicated process easier for both yourself and the seller, why wouldn’t you?


With Homesta, we will be with you every step of the way to make everything simpler, and give you more control.