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How does home loan pre-approval actually work?

Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 7 min read

What pre-approval is, and what it is not

As brokers we pre-qualify you before anything goes to a bank. We don't send you for pre-approval unless we think it'll be approved. So pre-approval is the bank confirming what your broker already worked out about your finances, and sometimes it isn't worth much more than the paper it's written on. What actually lets you sign the loan documents is unconditional approval, which only happens once you've found a property and your offer is accepted. Side by side in Pre-approval or unconditional approval: which one actually lets me sign?

Pre-approval vs unconditional approval: the four stages

Pre-qualified is me saying I'm confident you'll get approved, after I've verified your income, looked at your statements and understood your credit file. Pre-approved is the bank saying it, before there's a property. Conditional is the bank saying it's seen the property and will approve you once a few boxes are ticked, usually the valuation and a document or two. Unconditional, or formal, is the bank signing off on everything, and from there it's loan documents and the road to settlement. The words get used loosely, and that costs people. Each stage is unpacked in Pre-qualified, pre-approved, conditional, unconditional: what do the stages actually mean?

Do I need pre-approval before I look?

You need your numbers before you look, because you don't know where to aim otherwise. A formal pre-approval is a different question. If I've already got your payslips, run your scenario across the lenders and the price is well under your limit, a subject to finance offer can do the job. If the market's hot and you're being pushed to go unconditional, get the pre-approval: Do I need pre-approval before I look? How long does it last?

The bank also assumes you're ready to make an offer tomorrow, so it generally wants the deposit sitting there. The exception is a family gift, where some lenders will take a signed letter saying it's non-refundable and not repayable before the money lands: Do I need my whole deposit saved before I go for pre-approval?

Should I get pre-approved for the max?

It's a lot easier to come down in price once you've found a place than to go up. So I don't pre-approve you at your absolute ceiling, and I don't pin it to your exact budget either. Say you're looking at $700,000 to $750,000 and you could support a lot more. If the perfect place comes up at $770,000 and the difference is $20 or $30 a week, you'd probably go for it. Buff the pre-approval up slightly and the bank just says okay, rather than reassessing the whole file. Keep it simple: Should I get pre-approved for the max I can borrow, or just what I plan to spend?

The paperwork, and debts to clear first

For most employees it's ID, payslips, your tax return or income statement depending on the time of year, evidence of savings, and statements for any debts that aren't already on your credit file. Self-employed, two years of returns. Sit down with my list and it's about ten minutes: What documents do you actually need from me for a home loan?

Got a car loan or a card you're planning to clear? You generally don't need to rush around paying them off before pre-approval. We set the application up showing they'll be paid out and closed, and the closure confirmation becomes a condition of formal approval, which only comes once you've signed a contract: Do I have to pay off my debts for pre-approval, or can they be cleared before settlement?

How long does pre-approval last, and what's an old one worth?

Generally around 90 days, and it varies by lender. But the bigger trap is assuming it holds still. If rates have moved or your situation has changed, the bank reassesses at formal approval, and what you can borrow moves with it. If your letter is a few months old, rerun your numbers before you start making offers on the strength of it: My pre-approval was from back in June. Does it still count after all these rate rises?

Can you bid at auction with pre-approval?

Yes, but you'll be nervous, and for good reason. Win at auction and you're generally in an unconditional contract on the spot, with no cooling off and no finance clause. Pre-approval isn't the bank committing to that property, so if the valuation comes in low after you've won, you either find the difference or risk losing your deposit. The work has to be done well before auction day, valuation included where we can get one: Can I bid at auction with just a pre-approval?

Same logic once you're unconditional. You can walk away from a loan offer before you sign, even withdraw the application after. But once you're unconditional on the purchase contract, pulling out puts your deposit on the line: Can I pull out once my loan is unconditionally approved?

Does pre-approval affect your credit score? Why one application beats five

A pre-approval application usually lands on your credit file as an enquiry. Home loan enquiries are secured credit and don't do much damage on their own. What hurts is a pattern: car loans, personal loans and pay day lenders every few weeks, or five banks in a month because you're shopping for a yes. That's why I check your file and the lenders' policies before anything is lodged, and send one application to the lender most likely to say yes: How many credit enquiries is too many?

Related reading

Should I pay off my debts before I apply for a home loan? How much does buying a home actually cost, on top of the deposit? Every first home answer in the library The full guide: From exchange to settlement The full guide: Making an offer on a house The full guide: Should I buy now or wait?

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