What Is Mortgage Pre-Approval?

Pre-approval (also called conditional approval or approval in principle) is a lender’s assessment that you qualify to borrow up to a certain amount, based on your financial situation. It is not a guarantee — the lender will still formally assess the specific property before issuing full approval. But it tells you what you can borrow, demonstrates seriousness to sellers, and strengthens your position at auction.

Documents You Need

  • Income verification: 3 months of recent payslips (employed), or 2 years of tax returns and financial statements (self-employed)
  • Bank statements: 3–6 months of statements from all accounts showing savings history and spending
  • Identification: Driver’s licence, passport
  • Deposit details: Proof of genuine savings (money held for at least 3 months)
  • Existing debts: Details of any personal loans, car loans, credit cards, HECS/HELP debt, and other financial commitments
  • Living expenses: Most lenders use the Household Expenditure Measure (HEM) as a benchmark but will ask for your actual expenses

Steps to Get Pre-Approved

  1. 1

    Check and improve your credit score first

    Get a free credit report at getcreditscore.com.au or through your bank. Dispute any errors. Pay down credit card balances. Reduce credit limits you do not use — available credit (even unused) reduces borrowing capacity. Do this 3–6 months before applying if your score needs work.

  2. 2

    Calculate how much you can borrow

    Use an online borrowing calculator (moneysmart.gov.au has a reliable one). Most lenders require a minimum 10–20% deposit. With less than 20%, you pay Lenders Mortgage Insurance (LMI) — a significant cost. First home buyers may be eligible for the First Home Guarantee scheme, allowing 5% deposits without LMI.

  3. 3

    Use a mortgage broker (recommended)

    A mortgage broker accesses multiple lenders and finds the best rate and product for your situation at no cost to you (they are paid by the lender). This is more efficient than applying to individual banks, and brokers often access rates not available directly. Ensure the broker is licensed with MFAA or FBAA.

  4. 4

    Submit your application with documents

    Complete the pre-approval application with your chosen lender or through your broker. Provide all documentation requested. The lender assesses your income, expenses, debts and credit history. Pre-approval is usually issued within 3–5 business days.

  5. 5

    Start property searching within the approval validity

    Pre-approval is typically valid for 3–6 months. Do not apply for new credit during this period — it can affect your serviceability assessment when the bank formally approves the specific property.

This is general information, not financial adviceMortgage suitability depends entirely on your individual circumstances. A licensed mortgage broker or financial adviser can give personalised guidance.

Frequently Asked Questions

Yes — a pre-approval application triggers a hard credit enquiry which temporarily lowers your credit score by a small amount. Multiple applications with different lenders within a short period can have a more significant effect. Using a mortgage broker minimises this as they identify the most suitable lender before submitting a single application rather than applying to multiple lenders simultaneously.
Minimum 5% with the First Home Guarantee (government scheme for eligible first home buyers, limited places each year). Otherwise minimum 10% with LMI, or 20% to avoid LMI entirely. In practice, a 20% deposit saves significant LMI costs (often $10,000–30,000+) and improves your borrowing terms. Genuinely saved (not gifted) deposits are looked upon more favourably by lenders.