Pre-approval is permission to look. Unconditional approval is permission to buy. The gap between them is six to twelve weeks, and it is where most first home buyers get caught out.
Pre-approval is permission to look. Unconditional approval is permission to buy. They are different things, separated by six to twelve weeks, and the gap is where most first home buyers get caught out.
Here is exactly what happens in between, in order.
A lender assesses your income, debts and credit, and tells you the maximum they will lend. It typically lasts 90 days, and is usually withdrawn once you exchange a contract.
You pay the first deposit instalment — commonly 0.25% or $1,000, into the agent's trust account. The cooling-off period starts running. Pre-approval is usually withdrawn at this point.
Building and pest inspection, contract of sale review, title searches, and for units the strata records. This is your last chance to exit with minimal cost.
Your broker or lender submits the formal application with the signed contract, valuation instructions and your full financial picture. Your deposit may count toward your deposit account, reducing the cash you need to supply.
A bank valuer inspects the property. If it values below your purchase price, you face a shortfall. This is the single most common late-stage problem for first home buyers.
The lender approves or declines. Approval at this stage is usually unconditional — subject to the property and the valuation. If they decline, you can try another lender, but the contract may be at risk.
The lender issues a settlement statement showing the balance, the deposit account, and the full amount you must supply. This is when you find out if you are short.
You supply the balance, the lender funds the rest, title transfers, and you get the keys. If you cannot produce the funds, you breach the contract and typically lose your deposit.
The gap that catches everyone
Pre-approval says "based on what you've told us, we could lend you this much." It is not a commitment. At unconditional approval, the bank has verified your documents, run a credit check again, and valued the property. Anything can change in those ten weeks — a job loss, a new debt, a failed valuation, a change of rate.
What can still go wrong after you've signed
| Risk | How common | What happens | Prevention |
|---|---|---|---|
| Valuation below price | Common in soft markets | Bank lends only the value, you must cover the gap in cash or renegotiate | Research recent sold prices before offering, keep a cash buffer |
| Income changed | Less common | Offer declined, contract in jeopardy, deposit at risk | Don't change jobs or hours in the 10 weeks before settlement |
| New debt discovered | Common — car, renovation loan | Serviceability fails, offer declined | Do not take on new credit after exchange |
| Credit score drop | Rare but real | Offer declined on credit criteria | Check your credit report before applying, and again at unconditional |
| Cannot produce funds | Avoidable | Breach of contract, deposit forfeited | Confirm the exact amount and source of your funds early |
Under the 5% Deposit Scheme specifically
Government-guaranteed loans add one thing to this process: a participating lender is required. Not every lender offers them, and a pre-approval from a non-participating bank will not help you buy a property relying on the guarantee.
- Find a participating lender before you start looking. This is the first thing to sort out, not the last.
- Ask specifically whether they offer the 5% Deposit Scheme, the Family Home Guarantee, or Help to Buy — three different products, often at different desks.
- Confirm the genuine savings requirement in writing. Under the 5% scheme, your 5% deposit must generally be genuine savings, not a gift or a loan from a family member.
- Check whether the government guarantee affects the interest rate and how that is passed on. Some lenders price it differently.
- Have the pre-approval explicitly note the scheme. "Pre-approved for 5% scheme" is not the same as a standard pre-approval.
Timing your pre-approval
Apply for pre-approval before you start viewing seriously, not once you've found a property. A house that takes two weeks to sell can be gone in an afternoon, and many vendors will not entertain an offer without one.
The ten-week checklist
We publish general information, not legal or financial advice. Off-the-plan contracts, conveyancing and settlement law vary by state and by individual circumstances. Always have your own independent legal adviser review any contract before you sign — the cost is trivial against the risk. Found something wrong? Tell us.