Can I Buy a Property Without Pre-approval?

Finance Sep 13, 2023

6 min read

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The short answer is yes, you can buy without pre-approval, but as always, there are some caveats. 

In general, we recommend you obtain a pre-approval before starting to look at properties, but there are times when it would be okay for you to buy without a pre-approval, read on for more.

If you’ve been pre-approved recently.

If you’ve had a pre-approval that has expired in the last 6 months, and there’s been no change to your situation, then you should be fine to proceed without getting it reassessed. The only thing to note here is that interest rates have increased, which can reduce your maximum borrowing power.

If you are in a very strong financial position.

If you’re in a good financial position, have a sizeable deposit and cash reserves, a strong credit history, service the loan easily and are not looking to borrow at the top of your capacity, then you should be able to proceed without a pre-approval confidently. 

If you can put a finance clause in the offer.

If you are making an offer on a property by private treaty, you can include a Finance Clause in your offer which essentially allows you a couple of weeks to get your loan in place. If for some reason you are unable to obtain finance in this time frame, you will be able to walk away from the sale with your deposit intact. This doesn’t apply in an auction setting, as auctions (and offers made 3 days on either side of an auction) are unconditional.

Something to note here is that if the banks have slow turnaround times or there is some complexity to your situation, you may not be able to get finance before the finance clause becomes due. It’s good to have conversed with your broker before making an offer to ensure they can meet your finance deadline.

There are certain circumstances we would recommend you don’t buy without a pre-approval first:

If you have a low deposit and no cash reserves.

When you have a low deposit of say 5-10% and not a lot of cash in reserve, it’s a good idea to get pre-approved. When you are borrowing a higher LVR the risk to the lender is greater should you need to sell prematurely, so they are a lot more diligent with their overall credit assessment. 

If you buy a property at a slightly higher price than anticipated, or there are extra costs that spring up, such as rectification works requiring you to dip into your deposit, there isn’t going to be much wiggle room.

If you are looking to borrow at the top of your capacity.

If you do have a 20% deposit but are looking to borrow towards your maximum borrowing capacity, it’s a good idea to seek a pre-approval. When you are borrowing more, repayments are higher, and your budget is going to be tighter, the risk to bank increases, and so their assessment of your application will be more rigorous than if you were borrowing a lower amount.

Are you relying on a guarantor or gifted funds?

Guarantor loans carry a level of complexity that doesn’t exist in standard loans. Aside from having to assess your situation, the lender will also need to look at your guarantor’s position along with the proposed security i.e. the house they are using to guarantee the loan with. Given the variables at play, it’s always good to get the pre-approval first.

If you are going to bid at auction.

We’ll always recommend a pre-approval if you are bidding at an auction. The reason for this is that auctions are unconditional. This means you can’t withdraw your offer if, for some reason, your finance doesn’t come through, and if you need to walk away from the purchase, you could lose your deposit.

A final note on pre-approvals.

Market conditions and bank timelines can also impact whether you are able to buy without a pre-approval. Even if you are in a strong financial position, if market conditions favour the vendor and there’s stiff competition between buyers, being able to make offers with fewer conditions (such as a finance clause) can mean the difference between getting the property or not.

Some agents will also ask if a pre-approval is in place before the open for inspection as they want to ensure they are spending their time and energy on serious buyers who are ready to proceed with the sale. 

It is possible to purchase a property without a pre-approval. But generally speaking, it can be advantageous to get pre-approved before starting to hunt for property and there aren’t many downsides to getting this ticked off first.

Get in touch if you have any questions or want to buy property without a pre-approval, our team is here to help.