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Understanding the home loan approval process

By Alanna Ngo

The application process for a home loan is a complicated one. We often hear stories of buyers believing they are approved for a loan when, at the last minute, their approval is withdrawn and they’re left in a panic, trying to to seek (fast) approval through another lender.

Here’s a breakdown of the different levels of approval and what they actually mean for borrowers.


Loan pre-approval has different names with different lenders. It can be referred to as a conditional approval, indicative approval or approval in principle.

Pre-approval is only an indication from a lender that they are willing to approve the loan once a full application is submitted. In most cases, a pre-approved loan is not fully assessed by the lender and as such, the lender isn’t obligated at this point to formally approve the loan when a buyer finds a property.

On-the-spot approval

Most lenders offer to pre-approve a loan application online in as little as thirty minutes. On-the-spot approvals don’t have time to be assessed by the lender’s credit department, and that means, they are not indicative that a loan will be formally approved down the track.

Borrowers should not take on-the-spot approvals as a green light to make an offer on a property or bid at auction.

The full loan application process

For buyers to have the confidence that they will receive formal approval, they are required to provide the following:

  • A completed and signed application form
  • Current payslips and tax returns
  • Bank statement showing evidence of savings
  • Declare any existing debts such as credit cards and personal loans
  • A passport and driver’s licence as proof of identification

A full assessment of your loan application by the lender’s credit department could take a few days.

Have the confidence to buy

Often, people who are going through the home buying process don’t have a full understanding of what the different approval options mean. That’s why prospective buyers can benefit from working with a mortgage broker. Knowing the loan application process inside-out, brokers can answer any client questions or concerns, such as:

  • Has the application been accepted by the credit department?
  • Do I need, or how can I avoid, lenders mortgage insurance?
  • What are the conditions on approval?
  • Is it safe to bid at auction or make an offer based on this pre-approval?

Any clients that are starting to look at properties to buy could save themselves a lot of time and stress by simply understanding what level of loan approval they have.


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