November 13, 2025

What Is Mortgage Pre-Approval and Why Should You Get One?

Buying a home is a big decision, and mortgage pre-approval can give you a valuable head start in the process. In a nutshell, pre-approval is when a lender conditionally agrees to lend you a certain amount for a home purchase, based on an initial review of your finances. It’s not a final home loan offer, but it’s a written commitment that shows how much you could borrow and it’s usually valid for 60-90 days.

What Does Mortgage Pre-Approval Mean?

Mortgage pre-approval, is essentially a green light from a lender to home buyers to go shopping. The lender evaluates your income, expenses, debts, and credit history, then determines how much they are willing to lend you for a mortgage. You will typically submit documents like pay slips, bank statements, and proof of savings. If everything is alright, the lender issues a pre-approval letter confirming the maximum loan amount you qualify for subject to certain conditions. Pre-approval is not a guarantee, you’ll still need to find an acceptable property and possibly meet other conditions like a satisfactory property valuation and no major changes in your financial situation since pre-approval.

It’s important to note that pre-approvals come with an expiry date. As mentioned, pre-approvals usually expire in about 2-3 months. If you don’t purchase a property within that period, you may need to update documents and renew the pre-approval. The good news is that getting pre-approved is free and carries no obligation, you’re not locked into that lender or required to take the loan.

Why Should You Get Pre-Approved?

Obtaining a mortgage pre-approval before you start shopping for a home is highly recommended for several reasons. It provides numerous advantages that can make your home-buying journey smoother and less stressful:

Know Your Budget

Perhaps the biggest benefit is that pre-approval lets you understand your buying power. Because the bank has vetted your finances, you’ll know the upper limit of what you can borrow. This means you can focus on homes in your price range and avoid wasting time looking at properties outside your budget. In short, a pre-approval gives you a clear spending cap, so you can house-hunt with confidence about what you can afford. Of course you need to do your own budget as sometimes, the bank will be prepared to lend you more than you are comfortable with so you need to have worked out your own affordability comfort level. The least you need to borrow the better!

Stand Out to Sellers

A mortgage pre-approval helps you stand out as a serious buyer. Real estate agents and sellers will see that you’ve already arranged financing up to a certain amount, which makes your offer stronger. If a seller has multiple offers, they’re more likely to choose the buyer who’s pre-approved over someone who isn’t, because there’s less risk of the deal falling through. Having that pre-approval in hand can give you a distinct advantage over other buyers who haven’t taken this step. You shouldn’t share what the maximum approval amount is with the agent/vendor.

Faster Loan Process

With a pre-approval, much of your financial paperwork is already done upfront. So when you do find “the one” and sign a contract, the remaining steps to get full mortgage approval can go much faster.

In short, a pre-approval practically gives you a head start! It costs nothing, doesn’t commit you to anything, and provides a range of benefits so there’s little reason not to get one if you’re serious about buying a home.

How to Get a Mortgage Pre-Approval

Securing a pre-approval is a relatively straightforward process, at Capital Advice, one of our mortgage advisors can help you through the process. Here’s how to go about it:

Prepare Your Documents

Common requirements include proof of income, payslips and other financial statements, bank account statements, passport or driver’s license, and details of your short term liabilities, and any other debts and expenses. The lender uses these to assess your financial health and determine the maximum loan amount.

Lender Assessment

The lender will evaluate your application, which typically involves a credit history check and calculating your debt-to-income ratio and loan-to-value ratio and how much deposit you have. They’ll also consider things like your employment stability and any existing loans or open credit lines (high credit card limits with Gem or Qcard can reduce how much you can borrow, even if not fully used).

Receive Pre-Approval

If all criteria are met, the lender issues a pre-approval often as a letter or certificate. This document states you’re conditionally approved for a home loan up to a certain amount. It will also list any special conditions. Common conditions include: subject to a satisfactory registered valuation of the property you purchase, evidence of insurance on the property, and sometimes a condition that your financial situation doesn’t change. Be sure to read these conditions so you know what’s required once you do find a house.

House Hunting Within Your Limit:

With your pre-approval in hand, you can confidently search for homes at or below your approved amount. Remember that the pre-approved amount is a maximum, not a target – you don’t necessarily need to spend to that limit, especially if you want to keep repayments comfortable.

Follow Through to Full Approval

Once you have an offer accepted on a property, you’ll provide the sale details via your adviser. They will then finalise the mortgage approval by checking the property and that it meets any requirements, like acceptable security. Since you already did the heavy lifting during pre-approval, this final step is usually quick. After that, you’re ready to draw down the loan on settlement day!

Throughout this process, we have open communication with you as your mortgage adviser and the lenders. It’s important to avoid opening new credit cards or loans during the house-hunting phase as it could impact your mortgage eligibility.

Ready to Get Pre-Approved?

If you’re considering buying a home, getting your mortgage pre-approval is a smart first step. It costs nothing, yet it empowers you as a buyer and can save loads of time and stress.

Capital Advice has a team of friendly mortgage brokers who can help you secure a pre-approval and guide you through the home loan process from start to finish. We work with a large range of lenders to find the best deal for your needs. Get in touch with us to start your pre-approval today. With our expertise on your side, you can enter the property market with confidence and put yourself in the best possible position to secure your dream home.