Delays often come from incomplete applications as well as lender workload and valuation timing. A complete application with clear supporting evidence usually moves faster than one that needs repeated follow-ups.
If you are a Victorian buyer planning to apply for a home loan, it helps to know what happens at each stage and what can slow things down. Timeframes vary between lenders and depend on how busy they are, so treat any timing here as a general guide only.
How Does the Home Loan Approval Process Work?
The home loan approval process has four main stages: preparing your application, lodging it with a lender, assessment by the lender, and formal approval followed by settlement. Each stage depends on the one before it, so gaps early on tend to flow through to the end.
First, your broker gathers your income, expenses, debts and savings details and works out which lenders suit your situation. Next, the application is lodged. The lender then assesses your ability to repay the loan, checks your credit history and arranges a valuation of the property. If everything is in order, you receive formal approval and the loan documents. Settlement follows, when the lender pays the seller and you receive the keys.
A broker can help you compare home loan options from lenders across Australia before you lodge anything. This matters because each lender has its own policies, and each credit application creates a credit enquiry on your file, whether or not it is approved.
Pre-Approval vs Formal Approval: What Is the Difference?
Home loan pre-approval is a conditional indication of how much a lender may be willing to lend you. Formal approval only comes after you have chosen a property and the lender has assessed both you and that property.
Pre-approval lets you shop with a clearer budget. It is not a promise to lend. The lender can change its position if your circumstances change, if the property valuation comes in low, or if its policies change. Pre-approvals also expire after a set period, which differs between lenders, so check the expiry date with your broker.
The trade-off is that a pre-approval involves a credit enquiry, and you will still need to go through full assessment once you find a property. If you are buying for the first time, our first home buyers page explains where pre-approval fits into the wider journey.
How Long Does Home Loan Approval Take?
The time from lodging a home loan application to formal approval varies by lender and by how complete your documents are. It can range from a few days to a few weeks, and the valuation and any extra questions are the usual causes of longer waits.
Settlement dates are set in your contract of sale, so approval needs to land well before that date. If you are bidding at auction in Victoria, there is generally no cooling-off period, so having pre-approval in place before auction day is especially useful. Your solicitor or conveyancer can confirm the terms of your contract.
As an example, consider a couple buying their first home who are self-employed. They lodge an application with only one year of tax returns and no explanation for a drop in income. The lender asks for more evidence, then pauses assessment while it waits. Their broker steps in, collects the missing financials and writes a short explanation of the income change. The lender resumes assessment and issues approval, but the contract's finance date is close, so they ask the seller for a short extension. Preparing those documents at the start would have avoided the scramble.
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What Not to Do While Your Home Loan Is Being Assessed
The biggest mistakes during assessment are taking on new debt, changing jobs without telling your broker, and making large unexplained transfers. Each of these can change the lender's view of your ability to repay.
A new car loan, buy-now-pay-later account or credit card limit increase can lower the amount you can borrow. Lenders also look closely at your bank statements, so large cash deposits or unusual transfers may prompt questions. If your work situation is about to change, tell your broker early so they can check how the lender will treat it.
One practical step is to keep your spending habits steady in the months before and during your application. Lenders review your recent statements, and consistent savings and spending patterns are easier to assess than sudden changes.
What Can Slow Down Your Application?
The most common causes of delay are missing documents, a low property valuation, and questions about income or spending. Most of these can be reduced with preparation.
If a valuation comes in below the contract price, the lender may base its lending on the lower figure. That can raise your loan to value ratio (LVR) and, depending on the lender and your deposit, may mean Lenders Mortgage Insurance (LMI) applies or costs more. You may then need to find extra cash or renegotiate the price.
The cost of LMI is added on top of your loan or paid upfront, depending on the lender, so it affects your total borrowing. A broker can show you how different deposit sizes change this before you commit to a property.
Does the Loan Structure Affect Approval?
Yes, the structure you choose can affect your borrowing capacity and how a lender assesses your application. Choices such as an owner occupied home loan versus an investment loan, interest only versus principal and interest, and fixed versus variable rate are each assessed differently.
For example, lenders assess repayments using their own buffer above the actual rate, so a higher assessment rate can reduce how much you can borrow. Features such as an offset account may be useful to reduce interest, but they can come with higher fees or a slightly higher rate than a basic loan. It is worth weighing the cost of a feature against how often you would actually use it.
To see how repayments might look, you can use a calculator when calculating home loan repayments. As an illustration only, a loan of $600,000 over 30 years at an example rate of 6.75% p.a. on principal and interest would have monthly repayments of about $3,891. Your actual rate will depend on your lender, deposit and circumstances.
Where Local Brokers Can Help in Victoria
A local broker can lodge your application, chase the lender and keep you updated, so you are not left waiting on your own. Our team works with buyers across the Peninsula and surrounding areas, including through our Mornington mortgage broker and Frankston mortgage broker services.
To find out more about who we are and how we work, visit About JAYA Finance & Mortgages. If you are ready to talk through your plans, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
How long does home loan approval take?
It varies by lender and by how complete your application is. It can range from a few days to a few weeks, and valuations or requests for more documents are common causes of delay.
Is pre-approval the same as formal approval?
No. Pre-approval is a conditional indication of what a lender may lend. Formal approval only follows once the lender has assessed you and your chosen property.
What should I avoid while my home loan is being assessed?
Avoid taking on new debt, increasing credit limits or making large unexplained transfers. Tell your broker early if your job or income is about to change.
What happens if the property valuation is low?
The lender may base its lending on the lower valuation. This can raise your LVR, which may mean you need more cash or that Lenders Mortgage Insurance applies or costs more.
