Skip to content

Pre-approval, conditional approval, unconditional approval - they're not the same

Pre-approval has become a marketing term - three different things are all called “pre-approval” and they don’t mean the same thing. Here’s the spectrum, from weakest to strongest.

Tier 1: Soft pre-approval (aka “desktop pre-approval”)

A lender runs a borrowing power calculation on your stated income and expenses. No credit check, no document verification. You get an indicative letter saying “on the information you’ve provided, you could borrow $X”.

Useful for: getting a number to budget around. Worth about as much as a borrowing power calculator on a comparison site.

Not useful for: making offers, bidding at auction, any situation where a real-estate agent asks to see your pre-approval letter.

Tier 2: Conditional pre-approval (the standard type)

The lender verifies your identity, runs a credit check, examines your payslips and bank statements, and provides a letter stating they will lend up to $X subject to (a) satisfactory property valuation and (b) a small number of conditions like proof of insurance.

Useful for: making offers on private treaty purchases, bidding at auction with confidence.

Not useful for: the actual purchase - you still need to submit the specific property for approval once you’ve signed a contract.

Tier 3: Unconditional approval

A specific property has been submitted, valued and approved. The lender will lend on this file, at this rate, for this term. Loan documents are being prepared.

This is the only tier that lets settlement happen.

Why conditional pre-approval can still fail

Three things kill pre-approvals after they’ve been issued:

  1. Valuation shortfall. The lender’s valuer comes in below your contract price, pushing you over the pre-approval LVR limit.
  2. Material change in circumstances. You changed jobs, had a late bill, got a new credit card, or put $20,000 on a car loan after pre-approval was issued.
  3. Policy change at the lender. Rare, but APRA or the lender’s risk team can tighten policy mid-pre-approval. You get caught by rule changes, not your own actions.

Pre-approval lifecycle

Most conditional pre-approvals are valid for 60-90 days. After that:

  • The credit check expires (most lenders: 90 days)
  • Payslips are considered stale (most lenders: 30-60 days)
  • Your bank statements need to be current (most lenders: 60 days)

You can usually roll a pre-approval once (fresh credit check, fresh docs) without a full reassessment. A second roll typically triggers a fresh file.

What to ask your broker

  1. “Is this a soft pre-approval or a conditional pre-approval?”
  2. “Which lender?”
  3. “For how much, at what LVR, and on what product?”
  4. “What conditions attach?”
  5. “Until when?”

If your broker can’t answer all five in under a minute, you don’t yet have a pre-approval worth relying on.