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A home loan pre-approval (also called conditional approval or approval in principle) is a written assessment from a lender stating how much they're prepared to lend you — based on your income, expenses, deposit, and credit profile — before you've found a specific property.
It's not a guarantee of finance. But it's the foundation of a confident house search.
Why Pre-Approval Matters
- Tells you your realistic budget — not just a calculator estimate
- Allows you to bid at auction with confidence
- Shows vendors and agents you're a serious buyer
- Identifies any issues with your application before you're under contract
- Speeds up formal approval once you've found a property
Pre-Approval vs Formal Approval
| Pre-Approval | Formal Approval | |
|---|---|---|
| Timing | Before finding a property | After signing a contract |
| Property assessed? | No | Yes — bank valuation required |
| Binding on lender? | No — conditional | Yes — unconditional |
| Credit enquiry? | Yes | Yes (if separate application) |
| Validity | 90 days (typically) | Until settlement |
What Lenders Assess in Pre-Approval
- Income: Payslips (last 2), tax returns if self-employed, employment letter
- Expenses: Bank statements (3–6 months), existing loan statements
- Deposit: Bank statements showing genuine savings history
- Credit: Bureau check — defaults, enquiries, repayment history
- Liabilities: Credit card limits, car loans, personal loans, HECS debt
- Property intent: Location preferences, property type
What "Conditional" Means
Pre-approval is always conditional. The conditions typically include:
- A satisfactory bank valuation of the specific property
- Your circumstances haven't materially changed (employment, income, debts)
- The property meets the lender's acceptable security criteria
- No changes to the lender's lending policy
How Long Does Pre-Approval Last?
Most lenders issue pre-approvals valid for 90 days. After expiry, the pre-approval lapses and you'll need to reapply with updated documents. Some lenders will extend for another 90 days if your circumstances haven't changed.
Don't apply too early — if you reapply multiple times, each application leaves a credit enquiry on your file, which can slightly reduce your score.
Common Reasons Pre-Approval Fails
- Income lower than expected after tax / HECs deductions
- Hidden credit enquiries from BNPL services or phone plans
- Credit card limits too high (reduces borrowing capacity even if not used)
- Employment type changed (PAYG to self-employed in last 2 years)
- Existing loan payments not disclosed
- Deposit sourced as a gift without a proper gift letter
How to Get Pre-Approval
You can go directly to a lender or use a mortgage broker. A broker is usually better for first home buyers because:
- They access 40+ lenders with one application
- They identify the best match before leaving a credit enquiry
- They flag potential issues before you formally apply
- They understand lender policy differences (e.g., how overtime income is treated)
Frequently Asked Questions
our broker team provides pre-approval assessments across 40+ lenders for Sydney first home buyers. Call 0432 634 648 to start your pre-approval today.
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