Let’s say you used the mortgage calculator on my website. Let’s also say that you got a positive result and your numbers suggested strongly that you really, truly, honestly were in a position to borrow a stack of money and buy a house. Would you go to an auction and bid on the strength of that?

You’d look like a moron if you did.

Let’s now say that you approached your bank and they gave you a mortgage approval more or less on the spot. You walk out of there with an approval letter. Would you go to an auction and bid on the strength of that letter?

You might look like a moron if you did.

In recent times we’ve come across clients who approached their bank directly and got one of these ‘on the spot’ mortgage approvals. Unfortunately, it’s given them a sense of false hope and they’ve been totally oblivious to the hole they’re about to walk into.

Here’s an example of an ‘on the spot’ mortgage approval from a bank (I’ve deleted the client names for privacy).

Mortgage pre-approval

Now, it is completely normal to have a pre-approval subject to a valuation, a sale & purchase agreement, and your KiwiSaver withdrawal amount. Most people want to know how much they can borrow before they go house hunting, so having conditions relating to the house which you’ve yet to find makes sense.

However, the trouble with some ‘on the spot’ pre-approvals like the example I’ve attached is that they are subject to pretty much everything!

An approval which is subject to:

  • Filling in an application form
  • Signing the application form
  • Providing proof of income
  • Providing proof of deposit

… is basically a load of crap.

Even the uninitiated know that the above are critical to getting a mortgage pre-approval. When I see a letter like this it tells me is that the applicant has not been properly assessed and they have not gone through a decent credit assessment process. It follows that the approval they have isn’t worth the paper it is written on.

So why do the banks do it? Well basically, they’re looking to keep customers. Your existing bank is probably your first port of call in asking for a mortgage, right? So they’ll do as much as they can to keep you on their turf – ‘Here, have a pre-approval!’. Easy for them to do, helps them meet their targets, and all is well and good… until you hit purchase point.

When I send a loan proposal to the Broker Unit at any bank, it’s got all that stuff. I do that because I want you to have something you can rely on, after all, getting a house is not small bikkies. I also do it because the Broker Unit at every bank would tell me to sod off (literally) if I didn’t do a proper job for you. And rightly so.

I might sound like I’m blowing my own trumpet or picking at tiny problems just to get a few more people ringing my number. Not so. The reality is, this kind of rubbish approval will trip you up at sale time, every time. And I’m sick of seeing that. So why not get FREE expert advice and get the job done right?

If you see this kind of crap or you’ve actually got one of these rubbish mortgage approvals then please get in touch. We’ll happily do a better job of it for you.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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