You may have heard that one of the most important things you need to get before you start seriously looking at properties is pre-approval. It is when you apply to a lender to find out how much you could be approved to borrow for a home loan. The lender looks at your finances and agrees, in principle, to lend you a specific amount of money to buy a property. It is a conditional agreement, not a guarantee that you get that amount, or even a home loan. However, it is a good indication that you are likely to get a loan.
Here is what that actually means, and how it fits into buying your first home.
Why pre-approval matters
You do not have to have pre-approval before you start looking at properties, but it helps. Real estate agents usually ask whether your finance is sorted before they take an offer seriously, especially if other buyers are interested in the same property.
If you are buying at auction, pre-approval becomes essential. There is no cooling-off period once the hammer falls, and you cannot pull out of the sale for finance reasons. This means your finance needs to be sorted before you bid, not after.
Buying privately usually gives you more flexibility, since offers can often be made subject to finance. Even so, having pre-approval ready makes your offer stronger, and stops you looking seriously at homes you cannot actually afford.
What happens when you apply
To apply for pre-approval, a lender will look at your income, your regular expenses, and any debts you have. Most of what they ask for is information you already have: proof of identity, recent payslips or income statements, a couple of months of bank statements, and details of what you owe elsewhere, including credit card limits.
It usually takes a few days once you have provided everything. It is not binding on either side. You are not locked into anything, and neither is the lender.
How long pre-approval lasts
Pre-approval does not last forever. Most lenders keep it valid for 60 to 90 days, sometimes longer, depending on the lender. Once that period ends, it lapses, and you will need to reapply with updated documents.
Because of this, timing matters. The best time to apply is once you are genuinely ready to start looking seriously, not the moment you first start thinking about buying. Apply too early and it may expire before you find somewhere. Apply too late, after you have already found a property you like, and you may lose it while you wait for finance to be sorted.
What is affecting how much you can borrow right now
It may be harder to borrow as much as you could have a year or two ago, and it helps to understand why.
Interest rates rose a few times earlier this year and have held steady since the Reserve Bank’s most recent meeting in August. Lenders also test every application against a slightly higher interest rate than you would actually pay. This is a standard check that applies to everyone, not something specific to your situation. Together, these two things mean most people can borrow a little less than they could last year.
There is a positive side too. The property market has cooled after a strong run. Prices have eased in a lot of areas, and homes are taking longer to sell. This generally means less pressure to rush a decision, and more room to negotiate once you find somewhere you like.
A few things worth knowing before you apply
An online calculator, like the borrowing calculator in the Penny app, can give you a rough idea of what you may be approved for in seconds. But it is also worth asking for a full pre-approval assessment before you start inspecting properties seriously. It takes a little longer, but carries more weight with agents and vendors, particularly if you are bidding on your own.
It is also worth closing or reducing the limit on any old credit cards you do not use. Lenders count your credit limit, not your balance, so a card sitting at zero can still reduce how much you are able to borrow.
If your number comes back lower than expected, ask your broker or lender to explain how they calculated it. There is usually a clear reason, and it is worth understanding rather than simply accepting it.
If you are buying on one income
If you are buying on your own, or your income includes payments such as child support, Family Tax Benefit, or a pension, it isn’t unusual. Lenders assess single applications and non-standard income all the time.
Support payments and pensions can often be counted as part of your income, alongside other earnings. This varies from lender to lender, and depends on the type of payment involved. Rather than applying to several banks to see which one says yes, which affects your credit file each time, it is worth finding out which lenders suit your situation before you formally apply.
How Penny can help
You do not have to work this out alone, or explain your situation to several different lenders. A broker can match you to lenders suited to your situation, get you a properly assessed pre-approval, and explain what it is based on in plain terms, including when to apply and how long it will last. You can find a vetted broker to talk to in the Penny app when you are ready.
This article is general information only and does not constitute financial advice. Interest rates, lending criteria and approval timeframes change frequently and can vary between lenders. Always confirm current requirements directly with your lender, and speak with a licensed mortgage broker or financial adviser before making any decisions about your home loan.
Sources
Reserve Bank of Australia. Statement by the Monetary Policy Board: Monetary Policy Decision, 11 August 2026
Australian Prudential Regulation Authority. APRA maintains current macroprudential policy settings in highly uncertain environment, 28 May 2026
Queensland Government. Buying property at auction, accessed August 2026
Canstar. Centrelink Home Loans, Are You Eligible?, accessed August 2026