How long does a home loan pre-approval last?

Many Aussies dream about the home they’d like to live in long before they buy it. These dreams can often come crashing down when the realities of buying a property and the costs involved are brought to light. As a borrower, you can get a home loan pre-approval and limit the surprises involved in your home buying experience. You’ll get a fair idea of how much you can borrow, and you can then look at homes within that price range.  

As well as fine-tuning your budget expectations with a home loan pre-approval, you may also need to adjust your purchasing expectations. You can speak to the lender to determine if there are any property types that they don’t offer home loans for the purchase of or place restrictions on home loans for particular properties. This can help avoid the heartbreak of not getting the full approval for a home loan because the type of home you’ve found doesn’t qualify.

You should do all these checks and discussions with your lender about the property type you wish to purchase well before the home loan pre-approval expires. With most Australian lenders, the average length of a home loan pre-approval can vary from three to six months. In this time, you should:

1. Find the home you wish to buy and make an offer
2. Ensure that your financial circumstances have not changed
3. Finalise the home loan application
4. Purchase the property

Depending on the lender, it could take anywhere from a couple of weeks to a month to get final approval for a home loan even if you have a pre-approval. Again, a pre-approval doesn’t always guarantee that you’ll get full approval of your home loan as there are more checks and reviews the lender needs to do. You should ensure you get written confirmation that your home loan has been approved. 

Why does a home loan pre-approval have an expiration date?

A home loan pre-approval is given based on the lender doing a basic review of your financial situation. Once you find a property and apply for full unconditional approval for your home loan, they’ll take a closer look at your circumstances. They’ll see if you’re capable of repaying the loan. Your circumstances can change between your application for pre-approval and full approval, so home loan pre-approvals have an expiration date.

The more time that passes from the time you’re issued a pre-approval to the time you apply for the final approval of the home loan, the higher the chance of a change in your finances. For this reason, home loan pre-approvals are only valid for a short duration of time, often between three and six months.

For example, suppose if you dipped into your savings for any expenses relating to looking for a house, you might not have enough left for a deposit. Your recent bank statements will reflect this decrease in the balance when you apply for the home loan. In this case, the lender may not consider that you have pre-approval and just require you to complete a full home loan application. To utilise the pre-approval period efficiently, consider reading up on the conditions lenders can include when giving you the pre-approval. If you cannot find a house that fits your budget or the lender’s requirements before your home loan pre-approval expires, you can try to get your pre-approval extended.

Can I extend the home loan pre-approval expiration date?

You may be able to get an extension on your home loan pre-approval by applying for it with your lender. As long as your financial circumstances don’t change significantly, your lender will likely grant an extension. 

Getting an extension on your pre-approval is a better option than reapplying for one. If you apply for an extension, it’ll be with the same lender, and they’re unlikely to run a full check on your finances for the extension. If you apply for a new pre-approval, the lender may run a credit check, and frequent credit inquiries can negatively impact your credit score. However, both the pre-approval and its extension are entirely at the lender’s discretion, and you may need to meet several conditions to qualify. The duration of the extension will also depend on the lender.

Before applying even for the pre-approval, you can consult a mortgage broker and rely on their advice and industry networks to ease you through the pre-approval and extension application process. A broker will probably recommend a lender used by others with a financial profile similar to yours. Consulting one could lower the risk of getting either your pre-approval, its extension or the whole home loan rejected. Again, mortgage brokers help you navigate the home loan application and home buying process, which means you may not need an extension. 

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