Construction Loan Pre-approval

Cooky · Sep 05, 2019 9:04 pm

Hi everyone,

I have recently submitted to council our plans for a custom build in south west Sydney. We have narrowed our builder choices down to three, having received estimates we are happy with. We will also be going to tender with them over this month, so I thought I should also start looking at the construction loan pre-approval process.

Our broker however is flat out refusing to go through this step with us because he says that no bank will provide pre-approval without

A. Approved council plans
B. Signed HIA contract.

My understanding that the above two items are needed for unconditional approvals and before any draw downs are made. I've read that pre-approvals can be granted on tenders and un-approved plans with some lenders.

When we got our land loan, the banks did an assessment of how much we could borrow for the construction portion but it was just verbal and nothing formal. Now that I'm progressing further, doesn't it make sense to have some sort of pre-approval before signing any contract?

Can anyone share their experiences?

I will be speaking to our lender and another broker tomorrow, but thought I'd ask here too. Thanks!

LOLZ · Sep 05, 2019 11:12 pm

Hi - my bank has provided conditional pre-approval for our KDR. The approval is subject to the provision of final plans, contracts, costing etc. The builder will need some confirmation that you are able to finance the build before they proceed.

Steve4216 · Sep 05, 2019 11:36 pm

I got pre-approval without any contracts sent through, no council, no HIA contract. You need the HIA contract for unconditional approval though, not council approval.

My broker did all that. I can pass on his information if you're interested? They're based in Surrey Hills, but most the work is done online. They were great through the whole process for me.

ASJ1981 · Sep 06, 2019 9:33 am

cooky - you definitely need to get another broker.

A bank can give you Pre Approval based on your Tender. Before you sign a Contract, you should get a Pre Approval so you know what the bank is willing to lend you and what your lending capacity is.

You do however, need a Final Contract as well as signed and approved Council Plans in order to get Unconditional Approval.

Cooky · Sep 06, 2019 9:39 am

LOLZ

Hi - my bank has provided conditional pre-approval for our KDR. The approval is subject to the provision of final plans, contracts, costing etc. The builder will need some confirmation that you are able to finance the build before they proceed.

Thank you, this is what I thought also.

Cooky · Sep 06, 2019 9:40 am

Steve4216

I got pre-approval without any contracts sent through, no council, no HIA contract. You need the HIA contract for unconditional approval though, not council approval.

My broker did all that. I can pass on his information if you're interested? They're based in Surrey Hills, but most the work is done online. They were great through the whole process for me.

Thank you so much, yes that would be great.

Cooky · Sep 06, 2019 9:41 am

ASJ1981

@cooky - you definitely need to get another broker.

A bank can give you Pre Approval based on your Tender. Before you sign a Contract, you should get a Pre Approval so you know what the bank is willing to lend you and what your lending capacity is.

You do however, need a Final Contract as well as signed and approved Council Plans in order to get Unconditional Approval.

Thanks very much. I think I might just speak with the bank directly and bypass the broker given I have to arrange the construction loan with my current lender regardless.

ASJ1981 · Sep 06, 2019 9:50 am

Cooky

ASJ1981

cooky - you definitely need to get another broker.

A bank can give you Pre Approval based on your Tender. Before you sign a Contract, you should get a Pre Approval so you know what the bank is willing to lend you and what your lending capacity is.

You do however, need a Final Contract as well as signed and approved Council Plans in order to get Unconditional Approval.

Thanks very much. I think I might just speak with the bank directly and bypass the broker given I have to arrange the construction loan with my current lender regardless.

cooky When we got our land loan, our lender did a Pre-Approval for the Construction Loan at the same time - based on our Tender. Our lender said it was "responsible lending" for them to give pre approvals on construction loans since land and construction go hand in hand.

Hope that helps!

Cooky · Sep 06, 2019 10:44 am

ASJ1981

Cooky

ASJ1981

cooky - you definitely need to get another broker.

A bank can give you Pre Approval based on your Tender. Before you sign a Contract, you should get a Pre Approval so you know what the bank is willing to lend you and what your lending capacity is.

You do however, need a Final Contract as well as signed and approved Council Plans in order to get Unconditional Approval.

Thanks very much. I think I might just speak with the bank directly and bypass the broker given I have to arrange the construction loan with my current lender regardless.

cooky When we got our land loan, our lender did a Pre-Approval for the Construction Loan at the same time - based on our Tender. Our lender said it was "responsible lending" for them to give pre approvals on construction loans since land and construction go hand in hand.

Hope that helps!

Thank you so much for sharing your experience. We were given a formal indication but no actual pre approval as we hadn't selected our builder. Difficult to do with a custom build - I wasnt sure it would get approved by council despite the size being the only non compliant issue.

I'm extremely reluctant to sign a HIA contract to find we are then unable to pay for the build.

I don't know why our Broker is being so difficult around this.

ASJ1981 · Sep 06, 2019 10:51 am

Cooky

Thank you so much for sharing your experience. We were given a formal indication but no actual pre approval as we hadn't selected our builder. Difficult to do with a custom build - I wasnt sure it would get approved by council despite the size being the only non compliant issue.

I'm extremely reluctant to sign a HIA contract to find we are then unable to pay for the build.

I don't know why our Broker is being so difficult around this.

cooky - it does seem odd that your broker is reluctant. My broker is amazing. He was on top of it from the get go. I am in Sydney, if you need broker contact details, happy to share his details. He is also building a custom house at the moment so you'll have something in common :-D

If you don't have a Tender right now, that shouldn't stop you from getting a Pre-Approval. Basically, a Pre-Approval is just an indication of how much your borrowing capacity is. Definitely should get one before signing anything!

Cooky · Sep 06, 2019 11:01 am

ASJ1981

Cooky

Thank you so much for sharing your experience. We were given a formal indication but no actual pre approval as we hadn't selected our builder. Difficult to do with a custom build - I wasnt sure it would get approved by council despite the size being the only non compliant issue.

I'm extremely reluctant to sign a HIA contract to find we are then unable to pay for the build.

I don't know why our Broker is being so difficult around this.

cooky - it does seem odd that your broker is reluctant. My broker is amazing. He was on top of it from the get go. I am in Sydney, if you need broker contact details, happy to share his details. He is also building a custom house at the moment so you'll have something in common :-D

If you don't have a Tender right now, that shouldn't stop you from getting a Pre-Approval. Basically, a Pre-Approval is just an indication of how much your borrowing capacity is. Definitely should get one before signing anything!

Thank you! I've emailed our bank contact to push this forward.

My Broker said "we cant get any approval, unconditional or otherwise without DA approved plans and a contract. My suggestion to you is to find the cheapest builder and go with them and once your plans are approved we can get the approval"

Gobsmacked. Pretty bad advice. He was great during the land loan process...not sure what is going on now.

ASJ1981 · Sep 06, 2019 11:14 am

Cooky

Thank you! I've emailed our bank contact to push this forward.

My Broker said "we cant get any approval, unconditional or otherwise without DA approved plans and a contract. My suggestion to you is to find the cheapest builder and go with them and once your plans are approved we can get the approval"

Gobsmacked. Pretty bad advice. He was great during the land loan process...not sure what is going on now.

cooky I am pretty speechless with that statement from your broker :shock:

I have just PM'd you :-D

Cooky · Sep 06, 2019 11:32 am

Thank you!