There’s something uniquely exciting about the start of a home-buying journey. Whether you’re a first-time buyer or on the hunt for your next investment property in Melbourne, it all begins with one important step—getting pre-approved for a home loan.
At AxJ Finance Broker, we often describe pre-approval as your home loan’s green light. It doesn’t mean you’ve secured the loan yet, but it does mean a lender has reviewed your financial situation and given you the thumbs up to house hunt with confidence.
Let’s walk through what pre-approval home loan means, how to apply for one, and what you should keep in mind along the way.
What is Home Loan Pre-Approval?
Pre-approval—sometimes called conditional approval or approval in principle—indicates from a lender that, based on your current financial position, you’re eligible to borrow up to a certain limit. It’s not a binding contract, but it gives you a strong idea of how much you could borrow and what fair price range you should target in your property search.
For buyers in Melbourne’s competitive market, having pre-approval in your pocket shows sellers and real estate agents that you’re serious—and capable—of making an offer. It also helps you avoid wasting time on homes outside your financial reach.
How to Get Pre-Approved: Step-by-Step
Applying for pre-approval isn’t complicated, but it does require preparation. Here’s what the process typically looks like when you work with a finance broker like AxJ:
- Assess your finances: We’ll start by looking at your income, expenses, savings, and debts to understand your borrowing capacity.
- Submit key documents: You’ll need to provide bank statements, payslips, ID (such as an Australian driver’s licence or passport), and details of any liabilities like car loans or credit cards.
- Credit check: Your credit history plays a role in determining whether you’re a suitable borrower. Lenders look for a solid repayment history and responsible use of credit.
- Lender assessment: Once all your financial documents are reviewed, the lender issues a conditional pre-approval if everything stacks up.
- Start your search: With a clear idea of your budget, you can confidently start inspecting homes that fall within your loan limit.
Keep in mind that pre-approvals typically last for 90 days. If you haven’t found a property by then, we can help you renew or reapply depending on any changes in your circumstances.
Understanding Lending Criteria
One of the most common questions we get at AxJ Finance Broker is, “Why did my mate get approved for a bigger loan when we earn about the same?” The answer often lies in the lending criteria—and it’s not one-size-fits-all.
Every lender has their own formula for assessing risk, and even small differences in your credit report, employment history, or liabilities can make a difference.
Here are the core factors that typically influence your home loan approval:
- Income: This includes not just your salary but other income streams like bonuses, rental income, or dividends. Lenders look for consistency and reliability.
- Living expenses: Your day-to-day spending, subscriptions, childcare costs, and other regular outgoings are all considered.
- Debts: Existing obligations such as car loans or personal loans reduce your borrowing capacity. Even unused credit card limits are factored in.
- Deposit size: A larger deposit shows financial discipline and lowers your loan-to-value ratio (LVR), which reduces lender risk.
- Employment stability: Full-time employment is preferred, though self-employed borrowers can also qualify if they can show two years of financials.
- Credit history: A clean credit file boosts your chances significantly. Late payments, defaults, or frequent credit applications can hurt your application.
Meeting lending criteria doesn’t mean just ticking boxes. It’s about showing the lender that you’re a responsible borrower with the capacity to manage your loan without stress. That’s where working with an experienced finance broker comes in—we present your case in the best light possible.
Conditional Pre-Approval vs Full Approval
It’s easy to assume that once you’re pre-approved, you’re all set. But there’s an important distinction between conditional and formal (or full) approval.
Conditional pre-approval means your financial situation has been assessed and meets the lender’s general requirements. However, final approval is only given once you’ve chosen a specific property and the lender completes a full valuation and final checks.
Think of it like a green light—but only for the first leg of your journey.
Once the lender has reviewed the property details (including its market value and condition), conducted updated checks, and ensured your financial position hasn’t changed significantly, you’ll be issued formal approval. That’s when the paperwork becomes real, and you’re ready to move toward the settlement date.
Should You Apply Online or Through a Broker?
It’s tempting to go directly to a lender’s website and apply online, especially when it seems fast and straightforward. But here’s what many serious buyers discover the hard way: applying directly often means you’re navigating a complex and high-stakes process alone.
When you apply for pre-approval through a broker like AxJ Finance Broker, you’re gaining a strategic partner—someone who understands not only the products but also the lending criteria, hidden fees, and fine print.
Let’s look at a real-world comparison.
Online Application
You might submit your documents, get a response in a few days, and receive a general pre-approval letter. But you won’t know if the loan is truly tailored to your goals, or if there was a better option elsewhere.
Working With a Broker
We assess your full financial picture, explain your borrowing power in plain terms, and compare multiple lenders—not just the one you clicked on. We also identify red flags in your credit history or financial documents before the lender does, giving you a chance to address them.
More importantly, brokers operate under an Australian Credit Licence, which means we’re legally bound to act in your best interest. We don’t work for the banks—we work for you.
And if you’re a second-time buyer juggling a current mortgage, equity, or even looking at an investment property, having that personalised guidance is even more valuable.
Final Thoughts: Taking the First Step
Getting pre-approved isn’t just a checkbox in your home buying journey—it’s the foundation for everything that follows. It sets your budget, gives you negotiating power, and streamlines the entire loan application process once you’ve found the right property.
At AxJ Finance Broker, we make the process as smooth and transparent as possible. We’ll walk you through each step—from the first credit check to the day your lender issues full approval.
If you’re ready to start looking for your dream home, don’t go in blind. Talk to us about getting pre-approved today for your home loan application and take the guesswork out of your home loan journey.
FAQs About Home Loan Pre-Approvals
How long does home loan pre-approval last?
Most pre-approvals last between 60 to 90 days, depending on the lender. After that period, you may need to reapply or update your financial documents to maintain your approval status. It’s important not to delay your property search once you’re pre-approved. If your financial position changes—like switching jobs or taking on new debt—it could affect your chances of getting full approval when you find the right home.
Does pre-approval guarantee I’ll get the loan?
No, pre-approval is not a guarantee. It’s a conditional assessment based on your current financial position. Once you find a property, your lender will conduct a full review—including a valuation of the property—before granting final approval. If the property doesn’t meet their criteria, or if your financial situation changes (like losing your job or taking out a car loan), your pre-approval could be withdrawn or adjusted.
Can I make an offer on a house without pre-approval?
Yes, but it’s not recommended—especially in a competitive market like Melbourne. Without pre-approval, sellers may not take your offer seriously, and you risk discovering later that your loan application falls short. pre-approval helps you make faster, more confident decisions and signals to real estate agents that you’re ready to proceed. It also gives you a realistic view of what you can afford, helping you avoid emotional or financial disappointment.
Will applying for pre-approval affect my credit score?
Yes, but only slightly. When you apply for pre-approval, the lender will perform a credit check, which results in a small enquiry on your credit report. Too many applications in a short timeframe can negatively affect your score, so it’s best to apply through a broker. At AxJ Finance Broker, we help you apply strategically, avoiding unnecessary hits to your credit while boosting your chances of securing the right loan.
What if my financial situation changes after I’m pre-approved?
If your financial situation changes—such as losing income, changing jobs, or taking on new debt—it’s essential to let your broker or lender know immediately. These changes could impact your borrowing capacity and may result in your pre-approval being reassessed or withdrawn. Lenders assess your ability to repay based on your current stability, so keeping everything transparent helps avoid surprises during the formal approval stage of your home loan journey.