Pre-Approval in Place: What To Do For a Successful Home Purchase


If you are starting out on your journey to buy a home, one of the first things you need to do is determine what you will be able to borrow so you are narrowing the field to hone in on properties you are likely to be able to afford.

A couple of the terms you may have come across when you are at this stage of determining your borrowing power are ‘pre-qualification’ and ‘pre-approval.’ While these sound like they might be the same thing, there are some important distinctions between them a home buyer needs to understand.

Key Differences Between Pre-qualification and Pre-approval

When applying for a loan, the main difference between pre-qualification and pre-approval lies in the depth of scrutiny and commitment from the lender, with pre-qualification being more of a guideline and pre-approval being more solid.

Pre-Qualification: A Non-Binding Estimate

Pre-qualification is typically the first step in the mortgage journey. It provides a general estimate of how much you may be able to borrow based on self-reported financial information.

This process often involves answering a basic questionnaire or having an initial conversation with a lender about your income, assets, debts, and credit score. To assess your financial health, consult a financial advisor in Melbourne or other areas.

Benefits of Pre-Qualification

  • Guides Your Property Search: Helps you identify a general price range of homes to consider.
  • No Impact on Credit Score: Since it doesn’t involve a hard credit inquiry, your credit score remains unaffected.
  • Early Financial Insights: Offers an overview of potential financing options and helps you plan your next steps.

However, it’s crucial to understand that pre-qualification is not a binding commitment from the lender. The information provided during this stage isn’t verified, making it less reliable as a basis for making offers. A financial expert can assess your potential borrowing capacity.

Pre-Approval: A Detailed Financial Commitment

Pre-approval is a more thorough and reliable process that provides a conditional commitment from a lender to loan you a specific amount. This step involves the lender verifying your financial details by reviewing documentation such as pay slips, tax returns, and bank statements.

Steps in the Pre-Approval Process

  1. Preparation: Gather and organise your financial documents.
  2. Review Options: Work with financial experts to identify the best mortgage products and lenders for your situation.
  3. Application: Submit the required documents for lender review.
  4. Verification: The lender performs a credit check and assesses your financial standing.
  5. Conditional Approval: Receive a pre-approval letter specifying the amount you can borrow under certain conditions.

Pre-approval goes beyond providing an estimate—it acts as a formal confirmation of your borrowing capacity, subject to final conditions.

Why Pre-Approval is Essential for Homebuyers

With the real estate market heating up, especially in the warmer months, obtaining pre-approval should be a top priority for serious buyers. Here’s why:

  • Empowers Decision-Making: Pre-approval gives you a clear understanding of your budget, enabling precise financial planning and confident negotiations.
  • Saves Time: Focus your property search on homes within your pre-approved budget, optimising your efforts.
  • Strengthens Your Offer: Sellers are more likely to accept offers from pre-approved buyers, as it demonstrates financial readiness and reduces uncertainty.
  • Speeds Up the Loan Process: Pre-approval accelerates the finalisation of your loan when you find the right property, minimising delays that could cost you the home of your dreams.

In a competitive housing market, having pre-approval ensures you’re prepared to act swiftly and decisively when opportunities arise.

Planning Ahead For a Successful Purchase

If you want to purchase in the next few months, now is the ideal time to start preparing for your home purchase journey.

Start your journey with confidence by chatting to us at the pre-qualification stage and obtaining pre-approval early, ensuring you’re well-positioned to capitalise on opportunities and achieve your homeownership dreams as the property market warms up alongside the weather.

To learn more about financial security, speak to our qualified team of financial planners and wealth creation experts. 

Contact us online or call us on 03 9427 0855.