The home loan application process, step by step

The home loan application process is the path from working out what you can afford to a lender formally agreeing to fund your purchase. In Australia it usually runs in a clear order: save a deposit, work out your borrowing capacity, compare lenders, apply for pre-approval, find a property, then move to full approval and settlement. Knowing the steps to get a home loan before you start means fewer surprises and a search that stays within a realistic budget.

This guide walks through the home loan process in Australia from start to finish. It covers what a lender assesses, how pre-approval fits in, the difference between conditional and full approval, and the costs to plan for. For the wider picture, you can also explore our home loans hub.

The steps to get a home loan

The home loan application process follows a recognisable sequence. Here are the steps to get a home loan, in the order most buyers move through them.

Each step builds on the one before it. The earlier steps are about getting your finances ready and understanding your limits, while the later steps are about a specific property and the lender’s final checks.

What a lender assesses

Before a lender will lend, it needs to be satisfied you can repay the loan. To assess this it looks at your income, your regular expenses, your existing debts and your deposit. The aim is to understand your capacity to meet repayments now and if your circumstances change.

A common piece of guidance from Moneysmart is to stress-test your own budget. When you work out what you can afford to borrow, it helps to calculate what your costs would be if interest rates went up by 2 per cent. Building in that buffer gives you a clearer sense of what is comfortable rather than what is merely possible. You can read more in Moneysmart’s guide to buying a house.

To get a feel for the numbers, work out your borrowing capacity early. Try the borrowing power calculator to see roughly how much you may be able to borrow at different incomes and expense levels. Calculator amounts are estimates only, they do not take your personal circumstances into account, and using one does not guarantee you will be eligible for a loan. You will still need to satisfy your lender’s lending criteria.

Your deposit and lenders mortgage insurance

Your deposit shapes how much you need to borrow and whether an extra cost applies. A common savings target is 20 per cent of the purchase price, plus enough to cover your buying costs. Saving to that level is a useful goal, though it is not the only path to a loan.

Some lenders may accept a deposit as little as 5 per cent. Borrowing with a smaller deposit means your loan-to-value ratio (LVR) is higher. LVR is the size of your loan compared with the value of the property. If your LVR is above 80 per cent, you may need to pay lenders mortgage insurance (LMI).

There is also government help for some buyers. The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase a home with a deposit as small as 5 per cent, without paying lenders mortgage insurance. Whether you qualify depends on the scheme’s eligibility rules.

Comparing lenders and home loans

The lender you choose affects your repayments for years, so it pays to compare before you apply. Moneysmart suggests you contact at least two different lenders to get loan options personalised for your situation. Even a small difference in rate can add up over the life of a loan.

When you compare, look beyond the headline interest rate. A comparison rate is a single figure for the cost of the loan that includes the interest rate and most fees, so it gives you a fairer way to weigh one loan against another. You can read more about how to choose and compare home loans on Moneysmart.

A few features change the shape of your loan:

There is no single right answer here. The mix that suits you depends on your budget, how long you plan to hold the loan, and how much certainty you want over your repayments.

Pre-approval and full approval

Pre-approval is the point where a lender gives you an early indication that you appear eligible to apply for a loan up to a certain amount, based on the information you have given. It helps you set a price range and tells sellers you are a serious buyer. Pre-approval generally lasts for 3 to 6 months, so it pays to be reasonably ready to search once you have it.

Pre-approval is not the final word. It is usually conditional, which means it depends on conditions still being met, such as the lender verifying your documents and being satisfied with the property you choose. Full or unconditional approval comes after you find a property and the lender completes its checks, including a valuation of the home. Only then does the lender formally agree to provide the loan for that purchase.

Because pre-approval is conditional, anything that changes your position between pre-approval and full approval can affect the outcome. Taking on new debt, changing jobs, or choosing a property the lender values below the price you agreed can all matter, so it is wise to keep your finances steady while you search.

If you are buying your first home, our guide to home loan pre-approval for first home buyers walks through this stage in more detail, and our guide to the documents needed for a home loan application helps you get your paperwork ready.

Settlement and the costs to plan for

Once your loan is fully approved and you have exchanged contracts, the process moves to settlement. This is when ownership transfers and your loan funds are paid to the seller. Your repayments begin from here, so it helps to update your budget for the mortgage plus ongoing costs like council rates.

Plan for the upfront costs too. Stamp duty is generally paid within 30 days of settlement, and the amount depends on your state and the property. Building these costs into your deposit savings from the start means you are not caught short near the finish line. If you are mapping out the full journey, our guide to the first home buyer process in Australia sets out each stage.

How the team at Finance Lab can help

The home loan application process has a lot of moving parts, from working out your deposit and borrowing capacity to comparing lenders and timing your pre-approval. The team at Finance Lab can help you understand each step, prepare a strong application, and find lenders that may suit your situation. Get in touch to talk through where you are up to.

Frequently asked questions