Getting pre-approved for a home loan

Pre-approval is the moment you stop guessing what you can borrow and start house-hunting with a number a lender has actually looked at. It is not final loan approval. It gives you an indication of how much a lender may be prepared to lend, subject to the conditions of the approval, so you have a clearer idea of what you may be able to borrow before you start making offers.

This guide frames what pre-approval is, how a broker fits in, and what you need to pull together to get one, then points you to the detail for each.

Key takeaways

• Pre-approval is conditional, not final: it is a lender's indication of how much they may lend, and the conditions can include a satisfactory valuation, a final credit check and no material change in your financial circumstances.
• A mortgage broker may give you access to a range of lenders: a broker can compare products from the lenders on their panel, while a bank can generally offer its own products.
• Complete paperwork can help avoid delays: missing documents or information can slow an application down.
• Pre-approval has an expiry period: how long it lasts varies between lenders, and you may need to provide updated information if it lapses.
• Get it before you seriously start house-hunting: knowing your borrowing position can help you focus on properties within a realistic budget.

What pre-approval actually is

Pre-approval, sometimes called conditional approval, means a lender has assessed some or all of your financial information and indicated that you may be able to borrow up to a particular amount, subject to stated conditions.

The names and stages vary between lenders, but it helps to think of pre-approval as an early indication, formal or unconditional approval as a later stage once the lender has completed the required checks, and settlement as the point when the loan is drawn.

Pre-approval also has an expiry period, which varies between lenders. If it expires before you buy, you may need to provide updated information and have your borrowing position reassessed. The documents-for-pre-approval explainer covers what you'll need.

Pre-approval isn't the same as your buying budget

Your pre-approval tells you about your potential borrowing capacity. It doesn't decide what you should spend.

Your actual buying budget also needs to account for your deposit, the costs of buying, your repayments, interest rates and the financial headroom you want to keep. A lender may be willing to lend a particular amount without that being the right price range for your circumstances.

The borrowing capacity vs purchase price explainer and sticking to your budget cover this in more detail.

What pre-approval does and doesn't tell you

It can tell you:

• how much a lender may be prepared to lend
• whether your current financial position appears to meet the lender's criteria
• what conditions still need to be satisfied
• how much you may be able to spend, alongside your deposit and other costs

It doesn't necessarily tell you:

• that a particular property will be approved
• what the property will be valued at
• that your loan is ready to settle
• that you can safely spend the maximum amount

If you're buying at auction, ask your lender or broker exactly what has been assessed and what conditions remain before you bid.

Broker or straight to the bank

You can apply directly to a lender, or use a mortgage broker, who is a licensed credit professional that can manage the application for you.

A broker can compare products from the lenders on their panel. Going directly to a bank means dealing with that lender and the products it offers.

Neither approach automatically gives you the right loan. What matters is understanding the rate, fees, features, conditions and what you will be able to afford over time.

For the full picture, read what a mortgage broker does.

What you need to get pre-approved

You'll usually need to provide information about your identity, income, savings, assets and existing debts. Self-employed applicants may need additional financial and tax documents.

The full checklist is in documents for pre-approval.

What slows a pre-approval down

• An incomplete document pack: missing documents or information can create delays.
• Unexplained deposit funds: lenders want to see where the money came from; a large unexplained transfer raises questions.
• Undisclosed debts: if debts such as buy-now-pay-later accounts or HECS/HELP are identified later in the application, the lender may need to reassess it or request additional information. How these are treated varies between lenders.
• Letting it lapse: an expired pre-approval means re-submitting current documents before you can act.
• Treating it as a guarantee: the lender may still need to assess the property and complete its remaining checks.

What happens after you get pre-approval?

Pre-approval is usually the point where you can start seriously looking at properties within your budget.

When you find a property, the lender may still need to assess the property itself, including its value, and complete its remaining checks before final approval. The usual sequence is pre-approval, then finding a property, then the contract or offer, then the lender assessing the property, then final approval, then settlement. Not every lender follows it in exactly the same way.

That's why pre-approval should give you confidence about your borrowing position, not make you assume the loan is already guaranteed.

Does pre-approval mean I can bid at auction?

Not necessarily. An auction can require you to commit without the same contractual protections that may be available in a private sale.

Before bidding, ask your lender or broker whether your finance is sufficiently advanced for the commitment you're about to make, and what conditions remain. Complete your other due diligence as well, including reviewing the contract.

What if I find a property more expensive than my pre-approval?

Don't assume you can simply increase your offer and sort the finance out later. Speak to your lender or broker before committing to a higher price. Your borrowing capacity, deposit, other buying costs and the property's valuation can all affect how much you can actually finance.

Questions to ask

• How much could I realistically borrow, and how much deposit do I need?
• How long will this pre-approval last?
• Which lenders on your panel suit my income and situation?
• What exactly is still conditional once I have pre-approval?
• What documents are you still waiting on from me?

Common questions

What does pre-approval actually mean?

It means a lender has assessed some or all of your financial information and indicated you may be able to borrow up to a particular amount, subject to conditions.

How long does home-loan pre-approval last?

It has an expiry period that varies between lenders. If it lapses, you may need to provide updated information and have your borrowing position reassessed.

Does pre-approval guarantee my home loan?

No. It is an indication, not final approval. Conditions typically remain, and the lender may still need to assess the property.

Can I buy a house at auction with pre-approval?

Not necessarily. Ask your lender or broker what has been assessed and what conditions remain before you bid, because an auction can require you to commit without the protections a private sale may offer.

Can I make an offer above my pre-approved amount?

Speak to your lender or broker first. Don't assume the extra amount can be arranged after you have committed.

Does pre-approval tell me how much I should spend?

No. It indicates what a lender may be prepared to lend. What you should spend depends on your deposit, buying costs, repayments and the headroom you want to keep.

What happens after I get pre-approval?

You can start looking seriously. Once you find a property, the lender may need to assess it and complete its remaining checks before final approval.

Does the bank still need to value the property after pre-approval?

Often yes. A property valuation is a common condition of final approval.

Once finance is in place

Once finance is in place, the next challenge is understanding the property and contract you're considering. That's where your conveyancer becomes part of the buying team.

General information only, not legal advice. Lending criteria and conveyancing rules vary; confirm your situation with your lender or broker and a licensed conveyancer or solicitor.