The short answer
Life changes like job moves or higher expenses can impact your home loan pre-approval and final approval.
A pre-approval is based on your situation on the day you apply, and it usually lasts about 90 days. To turn it into formal approval, your finances need to look the same when you buy. A new job, a switch from full-time to casual, a career break, higher living costs or a bigger credit card limit can all derail the loan, so think ahead before you apply.
Is being ready to buy the same as being ready for pre-approval?
Not always. You might have been renting for years and feel ready to commit, but the timing of your pre-approval also depends on your finances now and over the next few months. A pre-approval is the lender’s view of you today. Formal approval happens later, when you have found a property, and the lender checks again.
How long does a pre-approval last?
Most pre-approvals last around 90 days. After that, the lender usually wants updated payslips, bank statements and other documents. If your circumstances have changed in that time, the outcome can change too.
What life changes can derail a home loan?
Changing jobs: a new role often comes with a probation period, and some lenders want you to finish it.
Moving from full-time to part-time or casual: your assessed income may drop.
Taking a career break or parental leave: you will need savings or a partner’s income to cover the gap.
Higher living expenses: a new car, a baby or a big lifestyle change shows up in your bank statements.
New credit: opening a new credit card, raising a limit or buying something on buy now pay later.
Big unexplained transactions: large transfers or withdrawals before settlement.
None of these automatically means a no. A change of job, for example, can still be approved with the right lender. The problem is a change the lender did not know about when they gave you the pre-approval.
Why do you need to think 6 to 12 months ahead?
You might have a full-time permanent job today that easily supports the loan. But if you are already thinking about leaving that job, going part-time or starting a business, that change is coming. Lenders ask about foreseeable changes, and it is far better to plan your purchase around them than to have the loan fall over at formal approval.
A typical Melbourne scenario
Daniel gets pre-approved for $650,000 in February while working full-time as a sales manager in Dandenong. In March he accepts a new role with a higher base salary, but it comes with a six-month probation and less commission. In April he finds a unit in Carnegie and signs the contract.
At formal approval the lender sees the new job, the probation and the lower commission. His assessed income drops and the approval is reduced. Had he told his broker about the job change first, they could have chosen a lender that accepts probation, or timed the move after settlement.
How to protect your pre-approval
Talk to your broker before changing jobs, hours or employment type.
Avoid new credit cards, loans or buy now pay later while you are buying.
Keep spending steady and avoid large unexplained transfers.
Renew your pre-approval before it expires if your search takes longer.
Be upfront about any planned changes so the loan is structured for them.
Key takeaways
Pre-approval reflects your situation today and lasts about 90 days.
Formal approval checks your situation again, so changes matter.
Job changes, reduced hours, new debts and higher spending are common deal breakers.
Plan ahead and tell your broker about any changes before they happen.
Read how banks view probation periods and first home buyer fatigue, check your numbers with the borrowing power calculator, or start your home loan pre-approval with our mortgage brokers.
General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.
Gav is the person you want in your corner when it comes to property finance. After years in banking and motor trade finance, he joined Elephant early and never looked back. He's passionate about combining property and finance to help clients achieve their goals through tailored financial structuring, and he's very serious about snacks at meetings.
