In short: Home loan pre-approval is a lender's written, conditional agreement to lend you up to a set amount before you have chosen a property. It usually lasts 90 days (some lenders allow up to six months), can be renewed, and depends on a satisfactory valuation and your circumstances staying the same. It is not a guarantee, but it lets you bid and negotiate with confidence.
Most buyers in Melbourne start looking at homes before they know what a bank will actually lend them. Pre-approval flips that around. You find out your ceiling first, then shop within it, and when the right place in Craigieburn or Wollert comes up you can move quickly. This guide explains the two very different kinds of pre-approval, what lenders check, how long the whole thing takes, and what can go wrong between pre-approval and settlement.
Two kinds of pre-approval, and why the difference matters
Not all pre-approvals are equal. The word gets used for everything from a two-minute online form to a full credit assessment, and the gap between them is where buyers get hurt.
| System-generated "in principle" | Fully assessed pre-approval | |
|---|---|---|
| How it is produced | Automated, based on figures you type in | A credit assessor reviews your documents |
| Documents checked | Usually none | Payslips, statements, ID, liabilities |
| Credit file checked | Sometimes | Yes |
| Reliability | Low; often overturned at full application | High; only valuation and changed circumstances remain |
| Suitable for auction bidding | No | Yes, with caution |
| Typical turnaround | Minutes | 1–7 business days |
A system-generated approval is a marketing tool. It tells you a lender is interested, nothing more. A fully assessed pre-approval means a real person has verified your income and expenses and applied the lender's policy. When people say their "pre-approval fell through", it is almost always the first type. Ask your broker which one you are getting.
What lenders assess
Pre-approval follows the same process as a full application, minus the property. The lender looks at:
- Income. Payslips and year-to-date figures for PAYG employees; two years of tax returns and notices of assessment if you are self-employed. Overtime, bonuses and casual income are usually shaded or need a 6–12 month history.
- Living expenses. Declared expenses are compared with the Household Expenditure Measure and against three months of bank statements.
- Liabilities. Credit card limits (not balances), car loans, personal loans, HECS/HELP and buy-now-pay-later accounts.
- Deposit and savings. Where the money is, whether it counts as genuine savings, and whether any part is a gift.
- Credit file. Repayment history, defaults, enquiries and your score. See credit score and home loans.
- Serviceability. Repayments are tested at your rate plus 3 percentage points under the APRA buffer. For illustration, a $600,000 loan at 6.00% p.a. costs about $3,597 a month, but you must show you could afford roughly $4,828 a month at 9.00%.
The result is a maximum loan amount and a maximum purchase price, usually expressed as a loan-to-value ratio. A pre-approval for $585,000 at 90% LVR means a purchase up to about $650,000 with a $65,000 deposit plus costs.
Documents you will need
Have these ready before you apply. Missing paperwork is the single biggest cause of delay.
- Driver licence and passport (or Medicare card) for 100 points of ID
- Two most recent payslips and, ideally, your latest PAYG income statement from myGov
- Three months of statements for every bank account, including savings held elsewhere
- Statements for every credit card, car loan, personal loan and BNPL account
- Evidence of your deposit and any gift letter from family
- Current rental ledger or lease if you are renting
- For the self-employed: two years of tax returns, notices of assessment and financials
The full list, with lender-by-lender notes, is in the home loan documents checklist.
How long pre-approval takes and how long it lasts
| Stage | Typical time |
|---|---|
| Gathering documents | 1–5 days |
| Broker packaging and lodgement | 1–2 days |
| Lender assessment | 1–7 business days (longer in busy periods) |
| Validity period | 90 days standard; up to 6 months with some lenders |
| Renewal | Updated payslips and statements; usually 1–3 days |
If your pre-approval lapses before you buy, it is renewed rather than restarted. The lender will want fresh payslips and statements and will re-check your credit file. If interest rates have risen or your circumstances have changed, the approved amount may change, so it is worth re-confirming your budget before you bid.
Worked example: pre-approval for a Craigieburn purchase
Priya and Sam earn $95,000 and $78,000, have $70,000 saved, one credit card with a $6,000 limit and no other debts. They want a four-bedroom house in Craigieburn around $650,000.
- Their broker runs a borrowing power calculation that shows a comfortable ceiling around $620,000 with the credit card, and about $645,000 if they cancel it. They cancel it.
- A fully assessed pre-approval for $600,000 is issued at up to 90% LVR, valid for 90 days.
- With $70,000 of savings, they allocate $65,000 to the deposit and $5,000 to conveyancing and inspections. As first home buyers, their stamp duty on a $650,000 established home is roughly $11,357 rather than $34,070, which they add to the loan headroom. See stamp duty for Victorian first home buyers.
- They find a house listed at $640,000 and offer $635,000 with a subject-to-finance clause. The lender orders a valuation, which comes in at $635,000. Formal approval is issued within four business days.
Had they bought at auction, no subject-to-finance clause would have applied. That is why the pre-approval had to be fully assessed, and why they kept a buffer between the approved amount and their bidding limit.
Pre-approval at auction
Victoria has no cooling-off period at auction, and finance conditions cannot be attached to an auction contract. Pre-approval is therefore the only protection you have, and it is conditional. Two risks remain even with a strong pre-approval:
- Valuation shortfall. If you pay $700,000 and the lender's valuer says $670,000, the lender lends against $670,000. At 90% LVR that is a $27,000 gap you must fund from savings.
- Property type. Some lenders will not accept certain properties (small apartments, units in high-density towers, homes on large or rural blocks) even though you personally are approved.
Ask the lender to review the specific property before auction day if possible. Some will do an upfront valuation for a small fee. The buying at auction guide covers the full process.
What can go wrong between pre-approval and settlement
Pre-approval is conditional on your circumstances staying the same. Any of the following can see it withdrawn or reduced:
- Changing jobs, going casual, or starting a probation period
- Taking on new debt, including a car loan or a new credit card
- Missing a repayment on an existing debt
- A large unexplained transaction in your accounts
- Lender policy changes (for example, tightening on high-LVR lending)
- Interest rate rises that push your serviceability below the line
- A valuation lower than the contract price
- Buying a property type the lender does not accept
The safest approach is to freeze your financial life from pre-approval to settlement: same job, same debts, no new applications. If something unavoidable happens, tell your broker immediately rather than hoping the lender will not notice.
Common mistakes
- Treating an online "approval" as real. Bid on a fully assessed pre-approval only.
- Applying to several lenders "to see who gives the most". Each application creates a credit enquiry, and several enquiries in a short period lower your score and make later lenders nervous. Let a broker compare policies on paper, then apply once.
- Spending the full amount. Pre-approval is a ceiling, not a target. Keep a buffer for valuation shortfalls and rate rises.
- Forgetting purchase costs. Use the upfront costs calculator so your deposit is not swallowed by conveyancing, duty and inspections.
- Letting it lapse silently. Diarise the expiry date and renew a couple of weeks before if you are still looking.
- Shopping in the wrong price band. If your pre-approval is at 95% LVR under the First Home Guarantee, remember the Melbourne price cap of $950,000 and stay under it.
Frequently asked questions
How long does pre-approval last?
Most lenders issue pre-approval for 90 days. A few extend to six months, particularly for buyers building or buying off the plan. When it expires you renew it with updated payslips and bank statements rather than starting from scratch. Renewal typically takes one to three business days, but the approved amount can change if rates or your circumstances have moved.
Does pre-approval affect my credit score?
A fully assessed pre-approval involves a credit enquiry, which is recorded on your file. One enquiry has a small, short-lived effect. The damage comes from making several applications within a few months, which lenders read as a sign of financial stress. Apply to one lender chosen with your broker, and your score will barely move.
Is pre-approval a guarantee I will get the loan?
No. Pre-approval is conditional on a satisfactory valuation of the property, your circumstances remaining unchanged, and the lender's policy at the time of formal approval. It is a strong indicator, and a fully assessed pre-approval rarely fails unless something changes, but you should still include a subject-to-finance clause in any private-sale contract.
Can I get pre-approval with a 5% deposit?
Yes. Under the First Home Guarantee, eligible first home buyers can be pre-approved at 95% LVR with no lenders mortgage insurance for a home up to $950,000 in Melbourne. Outside the scheme, 95% loans exist but attract LMI and stricter credit criteria. Read the 5% deposit guide for the eligibility rules.
Can I make an offer without pre-approval?
You can, but you are negotiating blind and the agent knows it. In a private sale a subject-to-finance clause gives you an exit if the loan is declined, but you may lose the property to a buyer who is ready. At auction, buying without pre-approval risks losing your deposit if finance is refused after you have won.
Should I get pre-approval before or after finding a property?
Before. Pre-approval takes up to a week, and in a competitive Melbourne market a good listing can sell in days. Getting approved first also tells you your realistic budget, which shapes which suburbs and property types you should be looking at. Sellers and agents take offers from pre-approved buyers more seriously.
Talk to GNT Finance
A fully assessed pre-approval with the right lender is the foundation of a stress-free purchase, and choosing that lender is where a broker earns their keep. Gorakh Timilsina spent years as a senior credit officer assessing applications, so the GNT Finance team knows what assessors look for and packages your file to pass first time, at no cost to you for our home-loan service in most cases. Book a free consultation or call 0426 403 703.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.