You are currently viewing How to Read Your Pre-approval Letter

How to Read Your Pre-approval Letter

  • Post author:
  • Post category:Lending

A bank pre-approval letter is usually about 3 pages of confusing bank jargon.

But don’t let it intimidate you. Everything you need to know is in only a few key areas. 

01 Check the amount that as been approved.

Have a look and check that it meets your needs. If you have a particular purchase price in mind, you’ll want to check that the bank funds and your own deposit equals the purchase price.


02 Ignore the interest rate, if included. 

Some banks include a floating interest rate in the letter, but this is not what they are offering you. Banks don’t issue the actual interest rates at the time of issuing an approval. Once you have satisfied their conditions, they will offer you the actual (usually lower) rates. When actual rates are issued they are usually valid for around two days and can change after that.


03 A bank’s pre-approval letter doesn’t mean that you can use it for any house you want.

You still have to get the bank to agree to the house that you want to buy. There will be certain houses that banks won’t want to use as loan security, so this is why you need to check before making an unconditional offer. These houses could include very old and run down, damaged or leaky houses.


04 Pay attention to the ‘approval conditions’ or ‘specific conditions’.

Amid all the standard information that is in every letter, you will find a portion that applies to you and your situation only and may have conditions such as providing proof of deposit, or closing down a credit card for example. These are your action points and you should do what you need to do in order to satisfy these conditions.


05 Take note of the expiry date.

The approval will have an expiry date, which is usually two or three months away. This expiry date can usually be extended once, but after that new information will need to be provided to update your approval.

How to Read Your Pre-approval Letter infographic