Like any application, the process of getting your home loan approved can be an exercise in patience. Unfortunately, there is no definite answer on just how long you can expect to wait, because the success of any application will depend on external factors. Australian home loan lenders typically will assess potential clients on a case-by-case basis.  

Using a fine tooth comb, the lender will inspect all the documents you submitted: 

  • Proof of identification documents 
  • Proof of employment / proof of income (usually PAYG employment is preferred for at least one borrower) 
  • Average living expenses and ongoing bills 
  • Any additional sources of income and access
  • Personal debt (this can include – but isn’t limited to – credit card debt, personal or car loans, HECS payments and more) 
  • Any current insurance, as well as any areas of potential insurance ‘risk’ 
  • Your offer on the property 

This initial application stage might take anything up to six weeks. This significant time difference entirely depends on the lender – their standard process of pre-approval, screening, credit assessment, but also any additional documentation or special circumstances which would require further clarification.  

For example, if the documents initially supplied didn’t include all the data above, or left some details out such as other sources of equity, alternate loans taken out separately or a poor borrowing history – this may take longer than average to rectify.  

If you want to improve your chances of a successful application, it’s also good to consider: 

  • Staying at the same employer for a couple of years, or providing proof of steady ongoing income (to signal that you would be able to meet your home loan repayments on time) 
  • Avoiding any sudden lifestyle changes (such as moving house, changing employers or taking a long break from work) 
  • Lowering your debt-to-income ratio, if applicable 
  • Applying with only one home loan lender at a time 
  • Improving your credit score, or providing detailed rental history (as this may be counted towards your credit history in Australia) 

A reputable and financially responsible home loan lender will always aim to ensure that they are providing an ethical loan amount to a borrower who can feasibly afford to meet their monthly repayments, so if you happen to find your home loan application has been denied, there is a chance you didn’t provide sufficient evidence that you can afford to have a home loan. 

On this basis, it’s always important to seek home loan pre-qualification, because that way you’ll understand exactly how much you can feasibly afford to borrow and you’ll be able to manage your expectations on loan amount prior to getting the application process started. 

What is home loan pre-approval? 

Home loan pre-approval or pre-qualification is generally the ‘conditional’ approval before you are formally approved for a new mortgage. On paper, this means the lender has reviewed your financial status and documents and you’ve met any requirements for borrowing, eligibility, terms and conditions and any additional criteria.  

The biggest reason many home buyers might choose apply for home loan pre-approval, is because it strongly indicates you’ve fulfilled the lender’s borrowing requirements and are more likely to be successfully approved for a new home loan. This can speed up the process significantly!  

However, it’s important to remember that most pre-qualifications are ‘conditional’, which means even if you make an offer on a property, the lender isn’t always obligated to follow through and formally approve the loan application in full. There may be additional factors that come into consideration, or a sudden unexpected change in circumstances that may affect your application status. 

What are the benefits of home loan pre-approval? 

When a lender pre-qualifies any borrower for a home loan, they will put a general cap on the amount you can successfully borrow, so that you won’t be tempted to spend further beyond this loan limit.  

It also means that you’ll have a clear idea of the types of properties that fall within your budget during the search process (if you’re actively looking) and will help you narrow down your real estate search for a property that falls under this pre-approved loan amount. 

How long does pre-approval last? 

Each home loan lender will have their own range on the number of months that the pre-approval stage will last for, but generally the average pre-approval period is between 3-6 months. If you haven’t found a property to make an offer for during this period, you can always ask your lender to extend the pre-approval term. However it’s also worth noting that home loan lenders will re-assess potential borrowers at this point, to make sure that your financial situation hasn’t changed. 

When should I apply for home loan pre-approval? 

Good news – if you’ve made it to the pre-approval stage of the property buying or home loan process, it means you’re getting close to the finish line! 

Home loan pre-qualification is one of the last stages on your journey to purchasing a property and should only be taken out when you’ve saved up a deposit that meets the lender’s requirements, shows the ability to work to genuine savings, have a good credit history – and you know that you have the borrowing power to be approved for the loan. 

Looking to pre-qualify for a home loan? Homestar can help you get the process started with our fast-track online Pre-qualify service.  

 

Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.