Do I need a pre-approval to buy my next home?

4 mins
Updated
March 13, 2025

Buying your next home is an exciting step, but before you start browsing listings and attending open houses, it's important to consider whether you need a home loan pre-approval. A pre-approval can offer clarity and confidence in your property search, but is it essential? Let’s explore what pre-approval means, its benefits, and whether it’s the right choice for your next home purchase.

What is pre-approval?

A pre-approval is a conditional offer from a lender that outlines how much they are willing to lend you based on an initial assessment of your financial situation. The lender evaluates your income, expenses, credit history, and existing debts to determine your borrowing capacity.

Pre-approval is typically valid for 3–6 months, giving you a clear idea of your budget during your home search.

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Do you need pre-approval to buy your next home?

While pre-approval is not legally required to purchase a property, it is highly recommended in many cases, especially in competitive markets or if you're serious about buying soon.

Situations where pre-approval is beneficial:

  • Competitive markets: Sellers are more likely to favour offers from buyers who have pre-approval, as it indicates they are financially ready to proceed.
  • Upgrading homes: If you're upgrading to a larger or more expensive home, pre-approval helps you understand what you can afford before making offers.
  • Bridging finance needs: If you're buying before selling your existing property, pre-approval helps clarify whether you qualify for bridging finance.

Situations where pre-approval may not be necessary:

  • Paying cash: If you’re buying the property without a loan, pre-approval isn’t required.
  • Early research stage: If you're casually browsing and not ready to commit, waiting until you're closer to buying may be more appropriate.

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Benefits of getting pre-approval

  • Budget clarity: Know exactly how much you can borrow, making your search more focused.
  • Stronger negotiation power: Sellers may view your offer more favourably if you have pre-approval.
  • Quicker settlement process: The final loan approval process may be faster if you've already undergone the pre-approval assessment.
  • Confidence in bidding: Particularly at auctions, knowing your borrowing limit helps you bid with confidence.

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How to get pre-approval

  1. Choose a lender or mortgage broker: Research options and select a lender that suits your financial situation.
  2. Gather documents: You'll need proof of income, expenses, debts, identification, and any other financial information.
  3. Submit an application: Complete the lender’s pre-approval application form.
  4. Await assessment: The lender will review your application and may ask for additional information.
  5. Receive pre-approval outcome: If approved, you'll receive a conditional offer outlining your borrowing limit.

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Things to keep in mind

  • Pre-approval is not guaranteed approval: Final approval still depends on the property valuation and any changes to your financial situation.
  • Credit check impact: Multiple pre-approvals within a short period can impact your credit score.
  • Expiry date: Make sure to act within the pre-approval period or request an extension if necessary.

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While pre-approval isn’t mandatory to buy your next home, it can provide significant advantages by streamlining the process, strengthening your negotiating position, and giving you a clear understanding of your budget. If you're serious about purchasing in the near future or entering a competitive market, securing pre-approval is a smart step to help you move forward with confidence. Speak with a mortgage broker or financial advisor to determine whether pre-approval is the right move for your next home journey.

Disclaimer
Prepared by Beck McLean Finance Pty Ltd ABN 80 632 809 833. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
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