How to Get Pre-Approved for a Home Loan in Australia
Home-loan pre-approval can help you understand your potential buying budget before you begin making offers on property.
It is an indication from a lender that you may be eligible to borrow up to a particular amount based on the information assessed at that time. It is not a guarantee that your final home loan will be approved.
What Is Home-Loan Pre-Approval?
Home-loan pre-approval is a preliminary assessment of your income, expenses, debts, deposit and overall financial position.
Depending on the lender, pre-approval may help you:
- Establish a realistic property budget
- Understand your approximate borrowing capacity
- Identify possible lender requirements
- Prepare for the property search
- Make offers with greater confidence
- Recognise issues that may need to be addressed before applying
Pre-approval commonly remains valid for a limited period, although the exact timeframe varies between lenders.
Final approval will generally depend on updated financial information, lender policy, credit assessment, the selected property and a satisfactory valuation.
What Documents Do You Need for Pre-Approval?
The documents required will depend on your employment, income and financial position.
Common requirements may include:
Identification
- Australian driver licence
- Passport
- Medicare card
- Visa information where applicable
Income Documents
PAYG employees may be asked for:
- Recent payslips
- Employment details
- Bank statements showing salary credits
- Evidence of bonuses, overtime or allowances where applicable
Self-employed applicants may require:
- Personal and business tax returns
- Notices of assessment
- Business financial statements
- BAS statements
- Business bank statements
- Accountant information
Assets, Debts and Expenses
You may also need to provide:
- Savings and deposit evidence
- Home-loan statements
- Credit-card limits
- Personal or car-loan statements
- Buy now pay later commitments
- HECS or HELP debt details
- Living-expense information
- Evidence of gifted funds where applicable
How the Home-Loan Pre-Approval Process Works
Step 1: Review Your Financial Position
Your income, expenses, debts, deposit and property goals are reviewed to estimate what may be affordable and realistic.
Step 2: Check Possible Lender Options
Different lenders can assess income, expenses, employment, debts and property types differently.
A mortgage broker can compare potentially suitable options rather than relying on the policy of one bank.
Step 3: Collect and Review Your Documents
Providing complete and current documents can help reduce delays and identify inconsistencies before the application is submitted.
Step 4: Submit the Pre-Approval Application
Once a suitable lender and loan option have been identified, the application and supporting documents can be submitted for assessment.
Step 5: Review the Lender’s Conditions
A lender may issue pre-approval with conditions that must be satisfied before final approval.
These conditions should be understood before making an unconditional offer or bidding at auction.
What Can Affect Your Pre-Approval?
Factors that may affect the lender’s assessment include:
- Income and employment stability
- Existing debts and credit limits
- Living expenses
- Available deposit
- Credit history
- Number of dependants
- Loan-to-value ratio
- Property type
- Visa or residency status
- Lender policy
- Changes to interest rates or serviceability requirements
Your borrowing position can change if your circumstances or lender policies change after pre-approval is issued.
Common Pre-Approval Mistakes to Avoid
Avoid:
- Making several home-loan applications without a clear strategy
- Taking out new credit before settlement
- Increasing credit-card limits
- Changing employment without discussing the effect on the application
- Underestimating living expenses
- Relying only on an online borrowing calculator
- Assuming pre-approval guarantees final approval
- Making an unconditional offer without suitable legal and finance advice
- Ignoring stamp duty and other purchasing costs
- Searching above your comfortable repayment budget
How a Mortgage Broker Can Help
As a mortgage broker, I can help you:
- Review your borrowing position
- Identify documents the lender may require
- Compare options from more than 40 lenders
- Explain lender policies and loan features
- Prepare and submit the application
- Respond to lender information requests
- Review the pre-approval conditions
- Coordinate finance requirements during the property search
A lender will still make the final decision based on its assessment, eligibility requirements, valuation and credit policy.
Frequently Asked Questions
Does pre-approval guarantee my home loan?
No. Pre-approval is conditional and does not guarantee final approval. The lender may need to reassess your financial position and approve the selected property before issuing unconditional approval.
How long does home-loan pre-approval last?
The period depends on the lender. Pre-approval is normally valid only for a limited time and may need to be renewed if you have not purchased a property before it expires.
Can I make an offer with pre-approval?
You may be able to make an offer, but the contract conditions should be discussed with your conveyancer or solicitor. Pre-approval does not guarantee that the lender will approve the property or provide final finance.
Can self-employed borrowers get pre-approved?
Yes. Self-employed borrowers may be eligible, although lenders can have different income-assessment and document requirements.
Does pre-approval affect my credit report?
A formal credit application may be recorded on your credit report. It is sensible to compare possible lender options before making multiple applications.
Start With a Home-Loan Pre-Approval Review
Before you begin attending inspections or making offers, understand your potential borrowing capacity, deposit requirements and lender options.
Call or SMS Nick on 0426 259 327.
Reviewed by Nicholas Parpis — Australian Credit Representative 552460 and Director of Truth Group Pty Ltd.
Information is general and does not consider your individual objectives or financial circumstances. Loan approval remains subject to lender assessment, policy, valuation and eligibility requirements.
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