Key takeaways
- Pre-approval is a lender’s conditional indication of how much it may lend you. It isn’t a guarantee and doesn’t commit you to the loan.
- Moneysmart says pre-approval typically lasts 3 to 6 months.
- Get it before you bid at auction, where there’s no cooling-off and the deposit is due on the spot.
- Lenders test your repayments at an interest rate at least 3 percentage points above the loan rate.
- Every credit application is noted on your credit report, so compare lenders before you apply.
Home loan pre-approval is a lender’s conditional indication of how much it may lend you, based on your income, debts, expenses and deposit. It lets you set a realistic price range and shows agents you’re a serious buyer. It isn’t a promise of a loan, and knowing the difference can save you from a costly surprise.
What pre-approval is, and what it isn’t
Pre-approval, also called conditional approval, means a lender has looked at your finances and is prepared to lend up to a certain amount, subject to conditions. It doesn’t commit you to that lender or that loan.
| Stage | Pre-approval | Formal (unconditional) approval |
|---|---|---|
| What the lender has checked | Your income, debts, expenses, credit report and deposit | All of that, plus the property, its valuation and the contract |
| What’s still outstanding | The property, the valuation and final checks | Signing the loan documents and settlement |
| Is the lender committed? | No, conditions still apply | Yes, if nothing changes before settlement |
| How long it lasts | Typically 3 to 6 months | Until settlement, within the lender’s time limits |
Pre-approval gives you a loan amount, not a price range. To get your price range, add your deposit, then take off buying costs such as transfer duty, legal fees, inspections and moving. Our NSW transfer duty calculator estimates the duty. Eligible first home buyers pay no duty on a home up to $800,000; see our first home buyer page for the other help available.
When you need home loan pre-approval
- Before an auction. If you’re the highest bidder you sign the contract and pay the deposit, usually 10%, on the spot, with no cooling-off. The NSW Government advises confirming the maximum you can borrow, including stamp duty, and having approvals in place before you bid.
- Before you make an offer. The NSW Government’s buying guide lists pre-approved finance as a step before making an offer. It also helps you move quickly to exchange.
- Before you search seriously. As Moneysmart puts it, if you’re pre-approved for $600,000, don’t waste time on homes advertised at $700,000.
- If you’re using the 5% Deposit Scheme. Once pre-approved, you have 90 days to find a home and sign a contract.
Documents you’ll need
- Photo ID and proof of citizenship or residency
- Recent payslips and employment details, or tax returns and notices of assessment if you’re self-employed
- Bank statements showing your savings and deposit
- Details of every debt and credit limit: credit cards, car and personal loans, buy now pay later and HECS-HELP
- An honest picture of your living expenses
- A gift letter if family is contributing to your deposit
- Details of any property you already own
Self-employed? Lenders assess you differently. See how we help with self-employed home loans.
Want pre-approval without the guesswork?
Phillip compares lender policies before any application goes in, so you apply with a lender that suits your situation.
How lenders decide how much you can borrow
Lenders must follow responsible lending obligations, so they check you can repay without hardship. They look at your income, living expenses, existing debts and credit limits, your credit report and your deposit. If you borrow more than 80% of the property’s value, expect lenders mortgage insurance unless you qualify for a scheme such as the 5% Deposit Scheme.
They also stress-test your repayments. APRA, the banking regulator, expects banks to assess new borrowers at an interest rate at least 3 percentage points above the loan’s rate, and in May 2026 it confirmed that buffer is staying. APRA also limits banks to 20% of new lending at a debt-to-income ratio of six times or more.
How long pre-approval lasts, and how to keep it valid
Moneysmart says pre-approval typically lasts 3 to 6 months. Each lender sets its own period, and if it lapses you’ll need to be reassessed. These can undo a pre-approval before you buy:
- changing jobs, or a drop in income
- taking on new debt or raising a credit limit
- missed repayments on existing debts
- a change in the lender’s policy or interest rates
- a property type the lender is cautious about.
Tell your broker or lender about any change before you bid or sign.
Does pre-approval affect your credit score?
Each application for credit is noted on your credit report, and Moneysmart warns that too many applications in a short time can lower your credit score. Applying with several lenders at once to see who says yes can backfire.
A broker can compare lender policies and rates first, then apply with the lender that suits you. We compare home loans from 50+ lenders.
From pre-approval to settlement
Find the property
Stay within your approved amount, leaving room for duty and other costs.
Send the contract to your lender
Before auction if you can, or as soon as you exchange.
Valuation
The lender values the property. If the valuation comes in below the price, you may need to put in more money.
Formal approval
The lender confirms the loan unconditionally.
Loan documents and settlement
You sign the loan documents, then your conveyancer settles, usually around 6 weeks after exchange.
Example: when the valuation comes in low
For example, you’re pre-approved to borrow up to 90% of the property’s value and agree to pay $800,000 with an $80,000 deposit. If the lender values the home at $760,000, the most it will lend is $684,000 (90% of $760,000). You would need $116,000 instead of $80,000, a $36,000 gap, plus your buying costs.
Fixing your rate? Ask about a rate lock to hold it between approval and settlement. Before you exchange, check the contract of sale clauses, and for the full journey read how to buy a house in Sydney.
Frequently asked questions
No. Pre-approval is conditional. The lender still needs to value the property, check the contract and confirm nothing has changed in your finances. A low valuation, a new debt, a job change or a property the lender won’t accept can all stop formal approval. Treat pre-approval as a guide, not a promise.
Moneysmart says pre-approval typically lasts 3 to 6 months, and each lender sets its own period. If it expires before you buy, you’ll need to update your documents and have the lender reassess you. Keep your finances stable in the meantime, because a change can affect the outcome.
You can, but understand the risk. An auction contract is unconditional, with no cooling-off and the deposit due on the day. Before you bid, make sure your deposit is ready, ask your lender whether the property is acceptable and, where possible, have it valued beforehand. If your finance then falls through, you can lose your deposit.
Each credit application is noted on your credit report, and Moneysmart says too many applications in a short time can lower your score. One well-chosen application is very different from applying with several lenders at once. A broker can compare lender policies first, so you apply with a lender that suits your situation.
Yes. Instead of payslips, lenders usually ask for tax returns and notices of assessment, and sometimes business financial statements. Requirements vary between lenders, particularly on how long you’ve been trading, so some lenders will suit you better than others. Having your documents ready makes the process quicker.
Sources
- Moneysmart: Buying a house (opens in a new tab)
- Moneysmart: Loan rejection (opens in a new tab)
- APRA: APRA maintains current macroprudential policy settings (28 May 2026) (opens in a new tab)
- NSW Government: Buying property at an auction (opens in a new tab)
- NSW Government: Making an offer on a property (opens in a new tab)
- Housing Australia: 5% Deposit Scheme for first home buyers (opens in a new tab)
This article is general information only and doesn't take your objectives, financial situation or needs into account. Figures and eligibility rules change; check the official sources above or talk to us before you act. Keystone Home Loans Pty Ltd ATF BEMA Family Trust, Credit Representative Number 564704 is authorised under Australian Credit Licence Number 384704.
Written by
Phillip Bui
Founder and Principal Mortgage Broker at Keystone Home Loans, based in Arncliffe, NSW. Accredited Mortgage Broker and Full Member of the Mortgage & Finance Association of Australia (MFAA).
