In short: Pre-approval (also called conditional approval) is a lender's indication that it would likely lend you a stated amount, based on information it has not yet fully verified. Unconditional or formal approval is the binding commitment, issued only after the lender has verified your documents and valued the specific property. Bidding at auction on pre-approval alone carries real risk, because auction contracts are unconditional.

Key takeaways

Pre-approval typically lasts three to six months and is not a guarantee.
Unconditional approval is property-specific — it applies to one address, not to any property you choose.
A valuation below the contract price is among the most common reasons a pre-approved loan fails at the formal stage.
Auction purchases are unconditional on the fall of the hammer, so pre-approval alone leaves you exposed to losing your deposit.

What does each stage mean?

Stage	What the lender has done	What it commits them to
Indicative / online estimate	Run your stated numbers through a calculator	Nothing
Pre-approval (conditional)	Assessed the application, often with a credit check	Nothing binding — conditions remain
Unconditional (formal)	Verified documents, valued the property, satisfied all conditions	Committed, subject to the loan contract

The word "approval" in the middle row does a lot of misleading work. Read the conditions attached — they typically include satisfactory valuation, verification of income, and confirmation that your circumstances have not changed.

Why do pre-approvals fall over?

Valuation shortfall. The lender values the property below the contract price, so the LVR rises and the loan no longer fits policy.
Changed circumstances. A new job, a probation period, a new car loan or a fresh buy-now-pay-later account can all move serviceability.
Unverified income. Overtime, bonus and commission income is often assessed more conservatively than the applicant assumed.
Property type. Small apartments, high-density postcodes, serviced apartments and unusual construction can breach lender policy regardless of your finances.

How should you use pre-approval?

Treat it as a search boundary rather than a guarantee. Practical steps:

Ask whether it is system-generated or assessor-reviewed. The second is considerably more reliable.
Change nothing financially between pre-approval and settlement — no new credit, no job change if it can wait.
For private treaty purchases, negotiate a finance clause so you can exit if formal approval is refused.
At auction, get as close to unconditional as possible first, including a valuation on the specific property.

Frequently asked questions

Does applying for pre-approval hurt my credit score?

It can. Many pre-approvals involve a credit enquiry, and multiple enquiries in a short window are visible to other lenders and may be read as a sign of stress. Ask whether the lender is performing a hard enquiry before you apply.

How long does pre-approval last?

Usually three to six months. It can often be extended, but the lender will typically want updated payslips and may re-run its assessment against current policy and rates.

Can a lender withdraw unconditional approval?

It is uncommon but possible if something material changes before settlement — loss of employment, undisclosed debts, or a fundamental change to the security property. Approval is granted on the basis that your circumstances remain as represented.

Related reading

Sources

Applying for a home loan — ASIC Moneysmart
Responsible lending obligations, RG 209 — ASIC

Information current as at 2 August 2026.

General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.

Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.