Finder makes money from featured partners, but editorial opinions are our own.
Pre-approval for home loans
Getting home loan pre-approval means a lender has some idea of how much they can lend you. It's not a guarantee but it strengthens your position, especially at auction.
{"menuItems":[{"label":"What is home loan pre-approval?","anchorName":"#what-is-home-loan-pre-approval"},{"label":"How long does it take to get pre-approved?","anchorName":"#how-long-does-it-take-to-get-pre-approved"},{"label":"How long does pre-approval last for?","anchorName":"#how-long-does-pre-approval-last-for"},{"label":"Lenders who offer pre-approval","anchorName":"#lenders-who-offer-pre-approval"},{"label":"How do I get pre-approved?","anchorName":"#how-to-get-pre-approved"},{"label":"When should I apply for pre-approval?","anchorName":"#when-should-i-apply-for-pre-approval"},{"label":"Should I apply for multiple pre-approvals?","anchorName":"#should-i-apply-for-multiple-pre-approvals"},{"label":"What comes after pre-approval?","anchorName":"#what-comes-after-pre-approval"},{"label":"Need a home loan? Start comparing","anchorName":"#need-a-home-loan-start-comparing"}]}
Home loan pre-approval lets you shop for property with confidence, because it gives you the "green light" from a lender that – provided your situation doesn't change – you're likely to be approved for a home loan.
Is it compulsory? Absolutely not. In fact, not every lender even offers pre-approval.
But here's the thing: walking into an open home with a formal pre-approval and a deposit ready to go shows the seller that you are a serious buyer. If you make an offer, it could give you a better chance of having the offer accepted over other buyers, who may not be as organised with finance.
Pre-approval gives you a better idea of how much a lender is willing to lend you, and it's also very useful if you're buying a property at auction, because it gives you a firm upper limit to your bidding.
If your pre-approval taps out at $700,000, and you have a 10% deposit worth $70k, then you know your bidding limit is a maximum of $770,000.
Overall, a pre-approved buyer stands out from those that aren't pre-approved, and can make all the difference come auction day. So how does it actually work?
What is home loan pre-approval?
Pre-approval is a formal document prepared by a lender. It's an indication of how much money a lender is willing to lend you for a home loan. It's sometimes called conditional approval, or approval-in-principle.
Pre-approval requires a brief application, typically online (although some lenders require an in-person consultation) involving some identification and financial information.
Keep in mind that a home loan pre-approval is not the same as being approved for an actual mortgage. It is possible to get pre-approved by a lender, only to be rejected at the actual application stage – but this is generally only likely to happen if your situation substantially changes in between. For instance, if you change jobs and your income declines, that could impact your approval.
Pre-approval brings the following benefits:
You can get a more realistic idea of your borrowing power. This keeps you focused on properties you can afford.
It signals your seriousness to sellers. Pre-approval strengthens your negotiating position when it comes time to agree on a price. You will be considered a preferred buyer, similar to a cash buyer. This can really help in a tight auction.
A pre-approval can also reduce stress by helping to speed up the documentation process once you've found a home.
How long does it take to get pre-approved?
With many lenders offering online pre-approval, the whole process of applying can take as little as a few hours.
Online pre-approval is usually a system-generated process that is very quick, but doesn't involve a qualified credit assessor reviewing your pre-approval application.
Some lenders may offer this, while others may require a fuller assessment that involves a lender's credit department. This usually involves a credit report.
While the process can be fast, getting an official letter of pre-approval from your lender may take days, if not weeks, depending on how busy the lender is. During the Covid pandemic in 2020, some lenders took up to 2 months to process a pre-approval.
Most lenders will issue you a pre-approval that lasts three months. This gives you time to hunt for properties and get your actual application together. The expiry date is usually listed on your pre-approval letter, and once this date lands, you'll need to apply for pre-approval again.
Lenders who offer pre-approval
Not all lenders offer pre-approval, but here's a list of some who do:
You should get pre-approval once you've done your initial research. You should already have an idea of your borrowing power, your price range and the areas you're looking to buy in. Once you start looking seriously at properties with the intent to purchase then it is time for pre-approval.
Should I apply for multiple pre-approvals?
A pre-approval is not a formal home loan application, but the lender still makes a credit enquiry. This is recorded on your credit file and can have a negative impact on your credit score if you apply for multiple home loans in a short amount of time.
Multiple enquiries makes it look like you're planning to take out too many loans at once. This is a red flag for the lender you do eventually go with.
When the lender checks your credit score, your pre-approval application will show up as an enquiry. For instance, it will show:
The enquiry date
The credit provider
The credit amount you applied for
The reason for the enquiry
The reference number
Lenders up until recently did not know whether applicants had been approved or declined for credit (they couldn't see the outcome of the enquiry). They would just assume that an applicant had been declined, as this would explain why they had applied for multiple pre-approvals.
Today, this information is being slowly collected and displayed in credit files, so this isn't as much of a problem, but applying for multiple mortgage pre-approvals can still indicate to lenders that you are experiencing financial stress.
As a result, lenders may view you as a high-risk borrower and be reluctant to grant you full loan approval.
What comes after pre-approval?
Once you find a property to buy, you need to get full or unconditional approval. This requires a more detailed application. Then you need to provide a contract of sale and the lender must conduct a valuation of the property and be satisfied that you haven't paid too much for the property
Once your application is approved it's time to draw up the loan documents. You’ll need to read your loan contract carefully before signing, and your lender will check that you’ve filled out everything correctly.
Your conveyancer or solicitor can then review the contract of sale, before you and the seller can sign a copy. Once a settlement date has been arranged, your lender will provide confirmation of your loan details. This is also the time at which you can expect to be charged for stamp duty and registration costs.
At settlement the property is yours and it’s time to start paying off your loan.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
You won't pay any more by taking out a home loan with us. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare loans.
We're experts
We've researched and rated dozens of home loans as part of our Finder Awards. We provide unique insights and our in-house experts regularly appear on Sunrise, 7News and SBS News.
We're independent
Unlike other comparison sites, we're not owned by a third party. That means our opinions are our own and we work with lots of home loan lenders, making it easier for you to find a good deal.
We're here to help
Since 2014, we've helped 150,000+ people find a home loan by explaining the nitty gritty details simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206) and a Tier 1 Generic Knowledge certification (RG 146).
When you apply for a home loan, a lender will take many serviceability factors into consideration when deciding whether or not to approve your application.
We do not offer home loans but if you are looking for options, you can check our comparison table. Once you’ve chosen a particular loan, click the Go to site icon. You’ll be directed to the lender’s website where you can start your application.
Can you opt out of getting a loan after you have filled out all the paperwork for the loan and have been given a verbal that the loan is pre-approved subject to the lender (St George) evaluating all the paperwork and doing a valuation of the property in question?
Home loan pre-approval is in many cases obligation-free, meaning that you can cancel it if you no longer require it or have found a better deal. The exact nature of a pre-approval agreement differs on a case-by-case basis depending on the lender, so I would recommend contacting St.George directly to find out if you can opt out.
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please note that the information published on our site should not be construed as personal advice and does not consider your personal needs and circumstances. While our site will provide you with factual information and general advice to help you make better decisions, it isn't a substitute for professional advice. You should consider whether the products or services featured on our site are appropriate for your needs. If you're unsure about anything, seek professional advice before you apply for any product or commit to any plan and read any disclosure documents (such as any Target Market Determination (TMD) and/or Product Disclosure Statement (PDS)) issued by the provider before making a decision.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan, we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
Pre-approval is a formal document prepared by a lender. It's an indication of how much money a lender is willing to lend you for a home loan. It's sometimes called conditional approval, or approval-in-principle.
need apply for motgage
Hi Nyasha,
We do not offer home loans but if you are looking for options, you can check our comparison table. Once you’ve chosen a particular loan, click the Go to site icon. You’ll be directed to the lender’s website where you can start your application.
I hope this helps.
Cheers,
Richard
Can you opt out of getting a loan after you have filled out all the paperwork for the loan and have been given a verbal that the loan is pre-approved subject to the lender (St George) evaluating all the paperwork and doing a valuation of the property in question?
Hi Julie,
thanks for the question.
Home loan pre-approval is in many cases obligation-free, meaning that you can cancel it if you no longer require it or have found a better deal. The exact nature of a pre-approval agreement differs on a case-by-case basis depending on the lender, so I would recommend contacting St.George directly to find out if you can opt out.
I hope this helps,
Marc.