Home loan pre-approval

What is pre-approval?

Home loan pre-approval (or conditional approval) means that a lender has agreed, in principle, to lend you money towards the purchase of your home but hasn’t proceeded to a full and final approval. A pre-approval will help you get an indication of how much you can borrow from the bank.

Benefits of a home loan pre-approval

• Getting pre-approved for your home loan allows you to look for a property with confidence.
• It can make your search more focused and give you an estimated budget to work with.
• Having a conditional approval can put you in a stronger position when you’re making an offer, showing sellers you’re serious and financially capable.

When you make an offer (provided the seller and their sale conditions allow), you can set purchase conditions. For instance, you might make your offer 'subject to finance', or 'subject to pest and building inspections'. It’s a good idea to get your solicitor or conveyancer to advise you on this.

When to apply for pre-approval

Timing your pre-approval close to when you’re planning to buy your home is key. Ideally, it helps to have your finances in order, and a clear idea of what you’re looking for in a property. As a prospective home buyer, you can apply for a pre-approval once you’ve done some initial research like:

• Working out your borrowing capacity using our financial tools and calculators.
• Working out how much you can afford to repay.
• Looking at the local property market and suburbs you’re interested in.
• Viewing different home loans options, and using our product selector if you’re not sure which one is the right fit for you.

This way, the pre-approval gives you a solid budget and positions you as a serious buyer when you find the right home.

Do you need your property finalised when applying for a pre-approval?

You don’t need to have chosen a specific property when applying for a conditional approval. It’s worth noting however that a pre-approval comes with an expiration date. Here are a few things to keep in mind:

• Avoid applying for a pre-approval too early in your home buying journey. This can be risky as pre-approvals have an expiry date, often around 90 days.
• If you haven’t found a property by then, you’ll need to reapply and go through the process again, which can affect your credit score. Multiple applications within a short period can lower your credit score and make you look like a riskier borrower to lenders, which may impact your ability to secure favourable loan terms when you’re ready to buy.
• There’s also a possibility that your financial situation could change, meaning the pre-approval may not correctly reflect your current borrowing capacity when you’re ready to buy.

Pre- approval process

Reaching out to your lender will help you get an understanding of what you’ll need for your application.

 The home loan pre-approval process typically starts with you submitting your application with all the necessary documents like income statements, bank records and credit history.

Your lender then reviews your financial situation. They’ll look at what you owe (loans, credit cards etc.), and how much you own (assets including cars, shares etc.)

A credit check is performed to assess your financial reliability and see how you’ve managed debt in the past, as this helps your lender gauge the risk of lending to you. A strong credit history will indicate you’re a trustworthy borrower.

How long does pre-approval take?

The time it takes to get a conditional approval depends on your individual circumstances. In some cases, it takes a few hours. In other cases, it may take a few weeks. Speak to your lender to get an estimate of how long your pre-approval may take. It’s also worth noting that a pre-approval is generally free-of-charge and is obligation-free for both parties. Meaning even if you gain pre-approval from a lender, you aren’t required to borrow from them.

Factors that affect pre-approval time

There are a few key factors that determine how long your mortgage pre-approval takes:

• Your financial documents: The sooner you provide all the necessary paperwork, the faster your pre-approval could be.
• Credit history: If there are any issues or errors with your credit report, it could take extra time to resolve them before moving forward.
• Lender’s workload: In case your lender is busy or is processing a lot of applications, it could take longer to get a home loan pre-approval.
• Complex finances: If you have multiple sources of income, are self-employed or have existing debt, it may take the lender time to assess everything.

Bidding on a house with a pre-approval

Once you have a conditional approval, you can bid on a property at auction. If your bid is successful, you'll then need to gain full approval.

Part of the final approval process involves the bank valuing the property you have purchased (or plan to purchase). So be wary of paying more than a fair price for the property, as this may affect the bank's willingness to grant final approval.

How do you apply?

If you’re looking to get started on your home loan journey, we’ve outlined all the documents you’ll need for the application in our how to get a home loan guide. Alternatively, you can book an appointment with NAB home loan expert who will guide you through the entire process. Your appointment can be in person, over the phone, via video or we can come to you. It’ll usually take around 60 minutes.

If pre-approval is granted, you’ll then be emailed a conditional approval certificate (valid for 90 days) which stipulates how much money NAB will lend you.