How to Get Pre-Approval for a Home Loan: A Step-by-Step Guide

Jaeneen Cunningham
Sep 2
6 min read

Loan Preapproval — Securing pre-approval for a home loan is a smart, proactive step in the property buying journey. By preparing your documents, demonstrating stable income and savings, and maintaining a strong credit history, you’ll put yourself in the best position to get the lender’s tick of approval.

For most Australians, buying a home is the biggest financial commitment they’ll ever make. Whether you’re a first-home buyer, upgrading to something larger, or looking for an investment property, one of the smartest steps you can take before making an offer is securing a home loan pre-approval.

Pre-approval gives you an idea of how much a lender is prepared to let you borrow, subject to conditions. It can provide real confidence when you’re house-hunting, since you’ll know the price range you can realistically target. But not all pre-approvals are the same, and the process involves gathering the right information and documents before applying.

In this guide, we’ll explain how pre-approval works, what documents you’ll need, how lenders assess your application, and why understanding your credit history is so important.

What is a Home Loan Pre-Approval?

A home loan pre-approval (sometimes called conditional approval or approval in principle) is when a lender indicates they are willing to lend you a certain amount based on an initial assessment of your finances. It isn’t a guarantee of finance, but it’s a valuable step toward full loan approval.

It’s important to note that only some lenders offer a fully assessed pre-approval, where your application is thoroughly reviewed—including a credit check, income verification, and assessment of existing debts. Others provide what’s essentially a computer-generated estimate based on the details you enter, without checking your credit history or verifying documents.

While the latter can be quick and useful for a rough guide, a fully assessed pre-approval is far more reliable. With one in hand, you can confidently negotiate with sellers and bid at auctions, knowing your finances have been properly vetted.

Why Pre-Approval Matters

Sets a clear budget: You’ll know what you can borrow, which makes property searching more focused.
Strengthens your position with sellers: Agents and vendors take you more seriously when you can demonstrate pre-approval.
Saves time: You won’t waste effort looking at homes outside your price range.
Identifies issues early: Any concerns about your credit history or financial documents will come to light before you’ve committed to a property.

Documents You’ll Need for Pre-Approval

Lenders want to see proof of your identity, income, savings, and financial commitments. The exact requirements differ depending on whether you are employed (PAYG) or self-employed.

1. Proof of Identity

Passport, driver’s licence, or other government-issued ID
Birth certificate or citizenship certificate if required

2. Proof of Income

For PAYG Employees:

Recent payslips (usually the last 2 or 3)
Latest group certificate or PAYG summary
Bank statements showing salary credits
Employment contract or letter from your employer (sometimes requested)

For Self-Employed Borrowers:

Two years of personal and business tax returns
Two years of notices of assessment from the ATO
Business financial statements (profit & loss, balance sheet)
Business activity statements (BAS), especially if tax returns are not current

Self-employed applicants often face more scrutiny, as lenders want reassurance that your income is stable and ongoing. Up-to-date financial records are crucial.

3. Proof of Savings and Assets

Bank statements for savings accounts
Term deposit statements
Evidence of shareholdings or managed funds
Superannuation statements (not always counted, but still useful)

Many lenders also want to see a genuine savings history—regular deposits into your account over at least three months—especially for first-home buyers.

4. Existing Debts and Commitments

Credit card statements (even if the balance is zero, the limit is considered)
Personal loan or car loan statements
HECS/HELP debt details
Other mortgage statements if you already own property

The Role of Employment Verification

Stable employment is a cornerstone of loan assessment. For PAYG employees, lenders typically want evidence you’ve been in your current job for at least 3–6 months. Longer tenure provides even more comfort.

For self-employed borrowers, consistency of income over at least two financial years is usually required. Lenders prefer not to rely on just one year’s figures, as income can fluctuate.

If you’ve recently changed jobs but are in the same industry or have a strong track record, some lenders may still consider you, but be prepared for extra questions.

Savings, Deposits, and Loan-to-Value Ratio (LVR)

Your deposit plays a big role in pre-approval. Lenders generally want to see that you have at least 5% of the property value in genuine savings.

The Loan-to-Value Ratio (LVR)—the amount you borrow compared to the property value—is critical. For example, borrowing $450,000 for a $500,000 property equals a 90% LVR.

At 80% LVR or lower, you avoid Lender’s Mortgage Insurance (LMI), which can save you thousands.
Above 80% LVR, most lenders require LMI unless you qualify for a government guarantee scheme.

Your savings record and deposit size directly influence the strength of your application.

Why Credit Scoring Matters

Most lenders in Australia use credit scoring models as part of their decision-making. This means your credit file—maintained by agencies such as Equifax or illion—is checked for:

Past applications for credit (credit cards, loans, phone plans)
Repayment history, including late or missed payments
Defaults or judgements
Current credit limits

A strong credit history can improve your chances of approval and access to better interest rates. Conversely, multiple recent applications, high credit card limits, or unpaid bills can reduce your score and may lead to a declined application

If you’re unsure of your standing, it’s wise to check your credit report before applying for pre-approval. You’re entitled to one free copy of your credit file each year.

The Pre-Approval Process Step by Step

Assess your financesReview your savings, debts, and income. Work out how much you’re comfortable repaying each month.
Gather documentsCollect the identity, income, savings, and debt documents relevant to your situation.
Choose a lender or brokerDecide whether to approach lenders directly or use a mortgage broker. A broker can compare multiple lenders and help you target those who offer fully assessed pre-approvals.
Submit applicationYour chosen lender or broker lodges the pre-approval application along with your documents.
Credit and financial assessmentThe lender reviews your credit report, income, and debts. For fully assessed pre-approvals, this step is comprehensive.
Receive pre-approvalYou’ll be given a maximum borrowing amount, usually valid for 90 days.
Start house-hunting with confidenceWith your pre-approval in hand, you can look for properties within your budget.

Limitations of Pre-Approval

It’s worth remembering that pre-approval is not a guarantee of finance. Final approval is still subject to conditions such as:

A satisfactory property valuation
Updated financial information (if circumstances change)
Validity period (most pre-approvals expire after 3 months)

Also, if you change jobs, take on new debt, or your financial position shifts between pre-approval and purchase, your approval amount may be reassessed.

The Value of Professional Guidance

While it’s possible to seek pre-approval directly, many buyers choose to work with a mortgage broker. An experienced broker can:

Explain the differences between lenders’ pre-approval policies
Help you gather the right documents (especially if you’re self-employed)
Guide you toward lenders that provide fully assessed pre-approvals
Identify potential issues with your application before submission

This support can make the difference between a smooth experience and last-minute disappointment.

Final Thoughts

Securing pre-approval for a home loan is a smart, proactive step in the property buying journey. By preparing your documents, demonstrating stable income and savings, and maintaining a strong credit history, you’ll put yourself in the best position to get the lender’s tick of approval.

Remember, not all pre-approvals are equal. A fully assessed pre-approval from a lender provides far greater certainty than a quick online calculator or system-generated response.

With the right preparation and professional guidance, you’ll be ready to shop for your new home with confidence, knowing you have a clear budget and a lender behind you.

How Etairos Finance Can Help

At Etairos Finance, we understand that getting pre-approval can feel overwhelming, especially when each lender has different rules and requirements. Our team will guide you through the process, explain what documents you need, and connect you with lenders who provide reliable, fully assessed pre-approvals.

Whether you’re self-employed or on PAYG, buying your first home or upgrading, we’ll help you put your best foot forward to the banks.