Overview

So, you've found a property that you've got your heart set on. There's just one problem: the auction is next week, you've not yet sorted out a loan and the bank estimates it'll take at least a month.

This guide is a walkthrough to help you get your loan approved quicker. Although we can’t guarantee a quick loan approval process, our experts can help you find a lender that may be right for you.

Here’s what you need to know.

Key Points

  • Getting pre-approval on your home can help speed up the loan process.

  • You’ll need to provide all the required documentation to get home loan approval. 

  • Pre-approval and unconditional approval of a home loan is different, but our experts can help explain the concepts.

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What is the loan approval process?

So you’ve saved up for a deposit, researched the area you want to live in and are ready to make an offer on a property. But if it’s your first time buying a house, the loan approval process can be confusing.

Before searching for your dream property, it can be worth getting conditional approval for a home loan. This is a letter from your lender that indicates how much they’re likely to let you borrow. This is also known as ‘pre-approval’.

Once you’ve found the home you want to live in, you can apply for full loan approval, which happens after your offer on a property has been approved.

Finally, your home loan has been approved. All that you need to do is sign the contract documents that your lender has sent you. The lender will verify the contract documents and settlement will start.

How long does it take for a loan to be approved?

This also varies between lenders and whether or not they have a backlog. 

Major lenders, such as ANZ and Commonwealth Bank have said that due to “exponential growth” in home loan applications, there has been a significant backlog of applications^.

However, the more information you provide and the fewer questions your lender needs to ask you, the quicker your loan should be approved. 

In many cases, the size of your deposit and the stability of your income can influence how quickly your home loan is approved. 

If you are providing a large deposit and can prove you have a stable income, then you may get loan approval within just a few days. 

However, a smaller deposit and a less stable income can blow out your approval timeline. It all comes down to how much work the lender has to do to assess your application. 

How long does it take for a home loan to be approved by the bank?

That depends on the bank. Some banks may take a little longer to approve your home loan than other mortgage lenders. 

They may have more checks and balances to fulfill, or it could be as simple as big banks having more loan applications to process than a smaller, independent home loan lender. 

It also depends on the complexity of your application, the property you want to buy, and how you intend on using the property. 

Generally speaking, most banks will finalise loan pre-approval within a few days to a few weeks. However, it can be longer depending on the circumstances of the individual.

What can I do to speed up the loan approval process?

It can speed up the loan approval process if you have your documents prepared in advance. Here’s what you need to do.

  • Get the bank statements ready. Gather bank account statements to demonstrate proof of savings and have your income tax returns to demonstrate proof of income ready. 

  • Pay off your debts. As your lender will look at how much you owe (debts) and how much you own (assets, such as cars and shares), it can help your application if you pay off your debts as you’ll have less outgoing expenses.

  • Show your residential paperwork. Have proof of identity documents by your side, and proof of Australian citizenship or permanent residency before you begin the application. 

Make sure you've got all your documents in order and don't try to cut any corners. Lenders need a complete application, so if anything's missing it can hold up the approval process.

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What is a home loan pre-approval? 

Lenders offer home loan pre-approval as a way to help home buyers get an estimate of their borrowing capacity. The lender will then assess your finances to see how much they will lend you.

Your lender may also offer you conditional approval. That means your lender may apply certain conditions you’ll need to meet — such as paying off other debt — in order to get final loan approval. 

Keep in mind that pre-approval and conditional approval are not guarantees you’ll get final approval. 

How long do pre-approvals take?

The pre-approval process depends on what lender you’ve applied with as well as the complexity of your application.

Generally speaking, most banks will finalise loan pre-approval within a few days to a few weeks. However, it can be longer depending on the circumstances of the individual.

How can I get pre-approved for a home loan quickly?

When you apply for a home loan, lenders will assess your financial situation to determine whether you are able to pay back the loan. 

This typically includes a credit check. Borrowers with a good credit score are more likely to be pre-approved quickly. You can improve your credit score by paying loan repayments, credit cards and other bills on time.

Your lender essentially wants to see proof that you are able to responsibly manage your personal finances. 

If you’ve been rejected and not sure why, here are 10 reasons why your application could be rejected.

How fast can you get pre-approved for a home loan?

Some lenders offer fast online pre-approvals. These may not require you to provide documentation up front, which significantly speeds up the pre-approval process. Some lenders even offer instant online pre-approval. 

But be careful here. Pre-approvals are not a guarantee that the loan will be approved, and may come with a range of conditions. 

You’ll still need to provide documentation to finalise the loan, and if the lender finds any inconsistencies in your application, they may choose to cancel the pre-approval or revise your borrowing limit.

Our experts at Compare Club Home Loans can help you if your borrowing limit has been revised or your pre-approval has been cancelled.

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Does a quick home loan pre-approval help your home loan get approved faster?

That typically depends on whether your financial documentation has been assessed as part of your pre-approval or not. 

If you provided all the documentation as part of your pre-approval application, then your home loan can generally be finalised quite quickly after you provide the contract of sale for the property you want to buy. 

However, if the pre-approval process didn’t require documentation, this will likely need to be provided and assessed before you get final approval and this will take extra time. 

Make sure you also look out for terms such as fully assessed pre-approval. This term means that the lender has reviewed your supporting documents and "fully Assessed" your application before providing a pre approval and will be much more likely to get fully approved once you find a property. 

A system assessed pre approval means your data has automatically filtered through the banks lending software and an auto decision has been made. These pre approvals are usually more likely to incur changes once a credit officer physically reviews the application after you've purchased a property.

Do I need to get pre-approval before attending an auction?

No, but it’s certainly a good idea. Pre-approval will give you an indication of how much you can spend, which will inform your bidding at the auction. 

The last thing you want to do is win the auction then find out you can’t borrow the amount you need. 

You may have to pay the deposit on the home directly following the auction, so if you can’t go through with the purchase, there’s a risk of losing your deposit. 

Can I buy a house without pre-approval?

You sure can. Home loan pre-approval is not compulsory, and it is certainly possible to begin the home loan application process after you have found a house you want to buy. 

However, pre-approval usually means final loan approval will be faster than if you were starting from scratch, as a lot of the groundwork with your application will have already been done. 

This can be very helpful if you’re going up against other pre-approved home buyers on the same property. With pre-approval, the vendor may look at your offer as more reliable that an offer from a buyer without pre-approval.

How do I find the best home loans? 

Comparing home loans to find the right one for you can be complex and time consuming. Compare Club takes the stress out of the process. 

We’ll do all the work for you and compare home loan products from over 40 of Australia’s leading lenders to find the right home loan for you. 

All you need to do is get busy finding your new dream home. 

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Faster home loan pre-approval can give you a head start when it comes to buying a new property. You’ll know how much you can spend, and can beat other buyers to the punch with a quick offer vendors will see as reliable. 

Pre-approval will also likely get you across the final approval finish line faster than starting your loan application process from scratch. 

And Compare Club makes it simple to find the best home loan for you. Let us show you how much you could save when you apply for a mortgage through our extensive lending panel.

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This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.

Australian Financial Review, Beware long bank delays in mortgage approvals, written 19th Feb 2021.