How to get pre-approved for a home loan

How to get pre-approved for a home loan

For many buyers, purchasing a home involves some compromise between the kind of home they want and the home loan they can get. You could’ve found a great property in a neighbourhood perfect for your family, but the bank won’t lend you the amount you need to buy the house. Such a situation can be doubly frustrating given the efforts you’d have made to find a suitable home. 

If you get pre-approved for a home loan, you may avoid this disappointment, as you may get an idea about how much you can borrow and the conditions you need to meet. A formal pre-approval often requires signing an agreement with the lender which has details of the home loan product you’re pre-approved for as well as any conditions that you need to fulfil before you submit the home loan application. This agreement may also mention any further checks required, such as verifying the valuation of your home, before your home loan is fully approved.

When to get pre-approved for a home loan

A home loan pre-approval can be useful in several scenarios, not least in helping you understand your financial situation from a lender’s perspective. For instance, you may be worried that lenders may rate your income insufficient for a loan, or that your credit score isn’t high enough. Discussing a potential home loan application with actual lenders can certainly help ease some of these concerns. Again, knowing the amount you can borrow can help you plan your savings, both for the deposit you need to pay if you apply for and get your home loan approved and for the repayments.

Depending on your circumstance, you can opt for either a system-generated pre-approval or a full assessment. A system-generated pre-approval involves submitting the application and the required supporting documents online and getting a quick estimate of the loan amount you can apply for, with some lenders even offering instant estimates. While you can get pre-approved for a home loan online, the estimates are usually conditional and cannot be considered reliable. In some cases, these pre-approvals may not involve a credit check at all, which means that the estimate could change drastically when a full assessment is conducted.

The best way to get pre-approved for a home loan may be requesting a full assessment, in which the lender thoroughly reviews your application and also takes your consent for a credit check. Again, they may ask you for clarifications or further documents if needed. If you get pre-approved for a home loan after a full assessment, you’ll only need to confirm later that your financial situation has not changed, and that the lender has no concerns about your home’s valuation. Remember that you’ll need to apply for the home loan before the pre-approval expires.

Where can I get pre-approved for a home loan?

Can you get pre-approved for a home loan online? Yes, you can. While the internet may not always be the best place to get pre-approved for a home loan, you can apply for pre-approval online, and also by calling or visiting a lender. You may only get a system-generated pre-approval when applying over the internet or phone, which may not be useful. For a full assessment, consider meeting a lender in person, which may help the lender confirm that you are indeed serious about applying for the home loan. You should also think about assessing your financial situation before approaching a lender, perhaps by using a calculator to estimate how much you can borrow. 

If you aren’t sure about which lender to approach, you can consult a mortgage broker who can help you identify the right lender and act as an intermediary to ease the pre-approval and application process. If you need more time and are worried about your pre-approval expiring, mortgage brokers can also get your pre-approval duration extended.

How long is a home loan pre-approval good for?

While getting a pre-approval may take a matter of hours or days depending on the lender and your circumstances, the pre-approval may be valid for between three months and six months. Consider checking with the lender whether this duration is inclusive of the home loan application processing time, which can take as much as a month and a half. Ideally, this should be sufficient time for you to find a property of your choice, if you already haven’t shortlisted a few options. You may also need this time to clear any hurdles that the lender may have highlighted when reviewing your home loan application.

If you haven’t found the right property, or aren’t able to meet other home loan conditions within this timespan, you may be able to request an extension. However, lenders may only agree to an extension if there are no changes in your application or financial situation. Again, a pre-approval is not mandatory, and you can apply for a home loan even without it. If you are waiting for a promotion, an inheritance or a gift before applying for the home loan, you may want to apply for the pre-approval after that comes through.

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Learn more about home loans

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

Mortgage Calculator, Loan Amount

How much you intend to borrow. 

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

Why should you trust Real Time Ratings?

Real Time Ratings™ was conceived by a team of data experts who have been analysing trends and behaviour in the home loan market for more than a decade. It was designed purely to meet the evolving needs of home loan customers who wish to merge low cost with flexible features quickly. We believe it fills a glaring gap in the market by frequently re-rating loan products based on the changes lenders make daily.

Real Time Ratings™ is a new idea and will change over time to match the frequently-evolving demands of the market. Some things won’t change though – it will always rate all relevent products in our database and will not be influenced by advertising.

If you have any feedback about Real Time Ratings™, please get in touch.

What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.

That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.

Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.

Mortgage Calculator, Repayments

The money you pay back to your lender at regular intervals. 

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender. 

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.