You’ve found a home you can picture yourself living in. Before you start working out where the furniture will go, there’s another question worth asking: what does your finance approval actually cover?
Whether you’re looking in Bowral, Mittagong or Moss Vale, home loan pre-approval can help you narrow your search. But the conditions matter just as much as the amount. Here’s what to check before you rely on it.
What does home loan pre-approval mean?
Pre-approval is a lender’s conditional indication of what it may be prepared to lend. It can help you explore a price range, but it does not guarantee a loan for any property you choose. The lender still needs to assess your circumstances and the property before final approval. ASIC Moneysmart explains the distinction.
An online borrowing estimate is also not something to treat as a final lending decision. Ask what you have received, what information has been checked and what still needs assessment.
And keep your own budget in view. The maximum a lender may offer can be more than you feel comfortable repaying.
What should you prepare?
Start with an honest picture of your income, spending, savings and existing commitments.
Common application documents include:
- identification;
- payslips or other income evidence;
- bank statements and evidence of savings;
- details of loans, credit cards and living expenses;
- tax returns and business financial statements where relevant.
The exact documents and time periods depend on the lender and your circumstances. CommBank’s application checklist is one example, not a checklist every lender follows.
Mention variable income, self-employment or an expected change to your work early. That gives us something useful to discuss before an application is prepared.
It’s also worth checking your credit report for errors. Credit applications form part of your credit history, so compare options before submitting applications to several lenders. Moneysmart’s credit report guide explains what to check and how to request corrections.
For broader help with deposits and buying costs, see my Southern Highlands first-home buyer guide.
How long does pre-approval last?
Check the date on your own approval rather than assuming everyone gets the same period. For example, CommBank currently states 90 days, but your lender’s terms govern your approval.
If your search takes longer, ask what is needed to update or renew it.
Tell your broker if your income, employment, debts, expenses or deposit changes. An earlier assessment may no longer reflect your position. NAB’s explanation of conditional approval sets out common conditions, including unchanged finances, document checks and an acceptable property.
The property still needs to work for the lender
Finding a home within your price range is only part of the picture. A lender’s valuation helps it assess the property being offered as security. Factors can include its location, zoning, access and condition. NAB explains its valuation process.
Send through the listing and your intended use before assuming the property fits your approval. If your search has shifted from a town house to a lifestyle block, my guide to buying acreage covers the extra finance questions.
There are separate property checks too. In the Highlands, ask your solicitor or conveyancer to explain the planning information in the contract. Wingecarribee Shire Council’s planning certificate guide describes information such as zoning, heritage, flooding and bushfire-prone land.
A finance assessment does not replace legal advice or building and pest inspections.
Before you make an offer or bid at auction
Talk through the specific property, outstanding finance conditions and proposed dates with your broker. Separately, have your solicitor or conveyancer review the contract and explain when you would become legally committed.
Ask whether a finance condition is appropriate and can be negotiated. Don’t assume one is included, or that pre-approval lets you walk away if final finance is declined.
In NSW, residential purchases generally have a five-business-day cooling-off period after exchange, with different rules for off-the-plan purchases. There is no cooling-off period for an auction purchase, or a contract exchanged on the auction day after the property is passed in. Cooling-off rights can also be waived. NSW Government explains contracts and cooling-off rules.
Get advice before bidding or agreeing to waive protections. Pre-approval alone is not confirmation that the finance is ready.
Five questions to ask about your pre-approval
- What has the lender assessed, and what remains outstanding?
- What conditions apply to me and the property?
- When does it expire, and what is needed to renew it?
- What changes do I need to report?
- What needs to happen before final approval, and does the proposed purchase timetable allow for it?
Keep the answers with your approval letter so you can revisit them when you find a property.
Ready to talk through your plans?
You don’t need to know which lender to approach before we talk. I can help you understand the information needed and compare suitable options from the BMoney lender panel.
Finance solutions are provided through BMoney. The bank or non-bank lender makes the final approval decision, not BMoney. Ask me about any fees and how I’m paid before proceeding.
Talk to Sam about your home purchase. A short outline of your plans is enough to start; please keep financial documents and identification out of the website enquiry form.
This guide is general information, not a personal lending recommendation or legal advice. Requirements can change. Have your circumstances assessed and obtain advice on your purchase contract before committing.