Pre-approval, sometimes called conditional approval or approval in principle, is a lender’s assessment of how much it’s willing to lend you based on your current income, expenses, debts and savings. It gives you a realistic budget to shop with.
It’s conditional because the lender hasn’t yet seen the property you’ll buy. Before the loan is formally approved, the lender will want a satisfactory valuation and may re-check your circumstances.
Why it matters
Knowing your limit before you start looking saves time and heartache. It also helps you act quickly when you find the right place.
- Auctions. In Victoria, buying at auction is unconditional and there is no cooling-off period. You need confidence in your finance before you raise your hand.
- Private sales. Agents and vendors tend to take offers more seriously from buyers who are pre-approved.
- Budget clarity. You can focus on properties you can genuinely afford, including stamp duty and other purchase costs.
A note from Jenny Different lenders can assess the same household quite differently. Before applying, I compare how lenders on our panel are likely to treat your situation, so your pre-approval is with a lender that suits you rather than simply the first one you tried.
What lenders look at
Every lender has its own policy, but most will assess:
- Income: payslips for employees; tax returns and financial statements if you’re self-employed.
- Living expenses: your regular spending, usually verified against bank statements.
- Existing debts: credit cards (including unused limits), personal loans, car loans and other mortgages.
- Credit history: your credit report and repayment history.
- Deposit and savings: how much you’ve saved and, for some lenders, how consistently.
Each formal application is recorded as an enquiry on your credit report, so it’s worth being selective about where you apply.
How long it lasts
Most pre-approvals are valid for around three months, though this varies by lender. If yours expires before you buy, it can usually be renewed with updated documents. If your circumstances change, such as a new job or a new debt, let your broker know straight away.
Pre-approval vs full approval
| Pre-approval | Full (unconditional) approval | |
|---|---|---|
| When | Before you find a property | After you’ve signed a contract |
| Based on | Your finances | Your finances and the property |
| Valuation | Not yet | Completed and satisfactory |
| Certainty | Conditional | Formal approval, subject to loan documents |
How to get pre-approved
- Have a conversation with your lending specialist about your goals, budget and timing.
- Gather your documents: ID, payslips or tax returns, bank statements and details of any debts.
- Your lending specialist compares lenders and recommends where to apply.
- The application is lodged and the lender assesses it.
- You receive your pre-approval and start house hunting with a clear budget.
This information is general in nature and does not take into account your objectives, financial situation or needs. Lending criteria, terms, fees and charges apply and vary between lenders. Speak with us for advice about your circumstances.