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There’s a lot to think about when looking to buy a new home. Before you start looking at property listings, it’s worthwhile taking the time to understand your borrowing capacity and how much you may need to save for a house deposit.

One way of doing this is to get pre-approval (or conditional approval as it’s sometimes called). There’s no point in looking at mansions by the sea if your lender is only going to approve you for an apartment, so this will set you on the right path to purchasing your new home.

To help you get started, we’ve answered six of the top questions we receive on the topic of pre-approvals.

1. What is pre-approval?

Pre-approval is when a home loan lender agrees, in principle, to lend you money to purchase a home, without giving you final approval to go ahead. It’s a way for the lender to let you know that you can apply for a loan and how much you can afford, so you have the confidence to put offers on homes when you’re ready. One thing to note is you aren’t obliged to go ahead with the lender you receive the pre-approval through.

You can use this time to find out how much you might need to save for a house deposit, which will usually be between at least five to 20 per cent of the property value. It’s important to remember that factors such as your income, credit score and savings can influence the final amount can borrow. Check out our home loan borrowing power calculator to help you get started.

2. Do I require pre-approval?

In a hot market, real estate agents often require a pre-approval before you can make your offer to give the seller confidence you can afford the home when it comes to reviewing multiple offers.

Make sure you’re ahead of the game get your pre-approval ready. Not only will this put you in good stead with the seller, it will also mean you know how much you can spend before you start viewing properties to save you time and effort.

3. How do I apply for pre-approval?

To complete a pre-approval, we need to fully understand your financial situation. To help us do this, please bring all your relevant documents and personal information as guided by your home loan specialist to your meeting so we can give you the most accurate pre-approval.

4. How long does a home loan pre-approval last?

A home loan pre-approval lasts 90 days, which allows enough time for you to find your new home and have an offer accepted.

5. Am I guaranteed to be able to borrow the amount that I receive pre-approval for?

It’s important to remember that a pre-approval isn’t a guarantee that you can definitely borrow the amount the lender has given you pre-approval for. This is why we strongly encourage you to provide a really good snapshot of your financial situation when applying for a pre-approval, so you can get the best idea of approximately how much you might be able to borrow.

And remember, you should never sign a contract or assume your finance will be approved until you receive formal approval from a lender.

6. What is the home loan approval process?

Generally, home loan applications take approximately one to two weeks to process, depending on the complexity of the loan. This provides enough time for a valuation of the property if needed and validation of all required documentation.

Make sure you seek professional advice to better understand how much you can afford and what your borrowing power might be if it’s your first home loan.

If buying a house is on the horizon for you, start by requesting a call back from a member of the bcu team.


Important information

Information on this website is general and has been prepared without taking into account your objectives, financial situation or needs. You should consider whether this information is suitable for your objectives, financial situation and needs before acting on the information provided.