How long does it take to get a home loan approved?

Getting a home loan approved could be a short and simple or lengthy and complex process, depending on your application and your financial situation. While the average time from home loan application to formal approval and settlement can take between four and six weeks, some mortgage lenders advertise that they can approve a home loan in as little as 10 minutes.

The more work a lender needs to do checking a home loan application, the longer it may take to get approval. Simpler and more straightforward applications may take less time to get a tick. The closer you are to an “ideal” borrower, the quicker a lender may be able to approve your mortgage application.

Different lenders have different borrowing criteria, but are often looking for:

• Payslips showing a strong and steady income from a steady fulltime job you’ve held for some time
• A deposit of 20 per cent or more made up of genuine savings e.g. money earned from your job and put into a savings account or term deposit
• Bank statements showing reasonable household expenses
• Buying an established property
• Buying a home to live in as an owner occupier
• An excellent credit score

A relatively straightforward home loan application could receive preapproval in an hour and formal approval in one to three days in some cases.

Some newer mortgage lenders and fintechs such as Unloan claim to be able to use technology to approve home loan applications in as little as 10 minutes. Of course, this requires a borrower to fulfil these lenders’ eligibility criteria, so access to these quick turnarounds could be limited. For example, at the time of its launch, Unloan was limited only to borrowers refinancing existing home loans and did not offer conditional approvals or home loans for new purchases.

If a lender needs to spend a lot of time and energy checking the details of an application, it may take longer to be approved. Lenders need to assess whether you can afford the home loan’s repayments, if your debt-to-income ratio is too high, as well as the risk of you ending up in financial stress. Lenders also need to consider their own financial risk, such as if the value of the property will be enough to secure the loan in case you end up defaulting on your repayments. 

Some of the factors that could potentially complicate a home loan application and lead to a longer approval time include:

• Borrowing more than 80 per cent of the property value, requiring Lenders Mortgage Insurance (LMI)
• Paying a deposit using money that isn’t genuine savings
• Applying for a large home loan e.g. more than $2 million
• Already owing money on car loans, credit cards etc.
• Borrowing with a guarantor
• Purchasing something other than a typical established property e.g. property off the plan, rural property, vacant land, heritage-listed property etc
• Your income coming from sources other than full-time employment e.g. self-employment, investments etc.
• Being in a new job and still on the probationary period
• Buying a property that requires a full valuation
• Buying a property to rent out as an investor
• Applying with a bad credit score

If you’re not sure whether you’ll be able to get a home loan application approved in a timely fashion, or if you’d like some help getting your documents in order for a more efficient home loan application, you could consider contacting a mortgage broker.