Last reviewed: September 2026
Buying a home can feel confusing. Here's how the loan part actually works.
Every lender uses slightly different words to describe their process. But once you look past the branding, every home loan in Australia goes through the same steps.
- Conditional approval (also called pre-approval)
- Finding your property and making an offer
- Converting your pre-approval to a full approval
- Unconditional approval
- Signing the documents
- Settlement
- Post-settlement support
Here's what each one actually means.
1. Conditional approval (also called pre-approval)
Conditional approval and pre-approval mean the same thing. Different lenders just use different names for it. Don't let the naming confuse you, they're the same product.
What actually matters is a different distinction most people don't know about. There are two types of pre-approval.
The first is system assessed. A computer checks the numbers you've declared, like your income and your expenses, without a human actually verifying them properly. This is fast, but it's a lighter check.
The second is fully assessed. A real credit assessor at the bank looks over your file properly, the same way they would for a full application. This is a much stronger form of pre-approval.
Here's the catch. Not every lender offers fully assessed pre-approval. Most banks get too many applications to give every pre-approval a full human review, so they rely on the system assessed version instead. Only a handful of lenders will do a fully assessed pre-approval.
If your situation is a bit more complicated, self employed income, a past credit issue, anything outside the standard box, it's worth getting a fully assessed pre-approval if you can. It gives you far more certainty before you start bidding at auction or signing a contract. This is exactly the kind of thing your broker should already know, which lenders offer it and which don't.
2. Finding your property and making an offer
Now you know your real budget. Remember, your budget isn't just the loan amount. You also need to cover stamp duty and other buying costs on top of that.
Once you find a place you like, get a building and pest inspection before you sign anything. It costs a bit of money now, but it can save you a lot of pain later.
The deposit and cooling off rules also depend on how you're buying. In New South Wales, for example, buying at auction means the contract becomes unconditional straight away, no cooling off period, and a standard 10% deposit is due on the spot.
Buying through private treaty is a bit different. You normally get a cooling off period, but you can waive it using something called a Section 66W certificate. Buyers sometimes do this to make their offer more attractive, since it shows the seller you're serious and locked in.
If you're using a 5% deposit scheme, this changes again, and it's genuinely important to get this part right. By law, the standard deposit on exchange is 10%. Being on a government scheme doesn't automatically reduce that, the seller isn't obligated to accept 5% just because that's what your loan is based on.
Before you go anywhere near an auction or sign a contract, get your conveyancer to review it and negotiate what's called a special condition. This needs to be written into the contract, confirming the seller agrees to accept a 5% deposit on exchange instead of the standard 10%.
This step is not optional. If it isn't agreed and in writing beforehand, the seller can still legally demand the full 10% deposit. If you can't provide it, they may be entitled to end the contract, or take legal action against you to recover the shortfall. Getting this sorted before you make an offer, not after, is one of the most important things your conveyancer and your broker need to organise together.
3. Converting your pre-approval to a full approval
Once your offer is accepted, or you've successfully bought at auction, the signed contract of sale gets sent to the bank. From here, the bank arranges a valuation of the property and runs its final checks.
If your pre-approval had any conditions attached, closing a credit card, providing a letter from your employer, anything like that, this is the stage where the bank checks those conditions have actually been met.
4. Unconditional approval
Unconditional approval is also called full approval or formal approval. This means the bank has fully approved your home loan. You're locked in. You'll receive a formal approval letter, and if your contract had a finance clause, this is when that clause gets satisfied.
Here's something worth knowing, even though it rarely comes up. Despite the name, unconditional approval isn't quite as absolute as it sounds. Every bank's terms and conditions give them the right to withdraw a loan approval at any point right up until settlement. This is genuinely rare, and it usually only happens in serious cases, like suspected fraud. If you've been upfront and honest throughout the process, there's nothing to worry about here. But it's worth knowing the term unconditional isn't a hundred percent literal.
5. Signing the documents
Once your loan is unconditionally approved, your loan documents get prepared and sent to you.
There are two ways this can happen. If your loan is eligible for eSign, you'll get documents sent through DocuSign, by email, or through a link in your lender's online banking portal. If your loan isn't eligible for eSign, for whatever reason, physical paper documents get posted to you instead, and you'll need to sign and return them.
Once your documents are back with the bank, whether eSigned or posted, they get checked over. Around this time, you'll also need to organise building insurance. The bank will want a Certificate of Currency showing the property is insured, with the bank listed as the interested party, sometimes called the mortgagee. If you're buying a unit or apartment, they'll usually accept a copy of the building's strata insurance instead.
You'll also fill out a section called surplus funds or shortfall funds. This is where the bank works out exactly how much extra money, if any, needs to be paid at settlement on top of your loan.
Here's an example. Say you're buying a $1,000,000 property in New South Wales with a 20% deposit. You've already paid 10% as your deposit when you exchanged contracts. The loan covers 80%. That leaves another 10%, $100,000, still owing at settlement. That's your shortfall.
You've generally got two ways to cover it. You can nominate a bank account for the bank to debit the shortfall from directly. Or your conveyancer can set up a trust account, and you transfer the remaining funds there a few days before settlement.
Once your documents and insurance are sorted, your loan file gets marked ready for settlement.
6. Settlement
From here, your conveyancer organises settlement with the seller's conveyancer and the seller's bank. This happens through a national electronic settlement system called PEXA. On the settlement date, your purchase settles through the PEXA platform.
Make sure your shortfall funds are sitting in your account, or in your conveyancer's trust account, a few days before settlement. Don't leave this until the last minute.
Settlement is the day the property officially becomes yours, and your home loan becomes active.
7. Post-settlement support
A good broker's job doesn't end at settlement. We run a complimentary review of your home loan every six months, to check the rate you're on is still the sharpest one available to you. This is a standard part of what we do, not an add-on.
If anything comes up along the way, a change in your situation, a question about your loan, or you're just not sure if you're still on a good deal, you can come back to us any time. And if refinancing ever makes sense, whether that's to stay competitive or to take advantage of something new in the market, we'll help you with that too.
Why use a broker instead of going straight to a bank?
The steps themselves stay the same no matter who you use. What actually changes is the support you get along the way, and how many real options you have.
With a broker, you've got a real person to call or text throughout the whole process, someone in your corner from start to finish, not a call centre queue. You also get genuine choice, access to 30 or more lenders instead of just one.
And as mentioned earlier, not every lender works the same way. Some offer fully assessed pre-approval, some don't. Some are better suited to self employed borrowers, others to more straightforward applications. Most people don't know which bank does what, and the bank you've used since you were a kid isn't necessarily the right fit for your situation today. Working that out for you is exactly what we're here for.
This page gives general information only. It doesn't take your personal situation into account, and it isn't legal advice. Rules, timelines, and paperwork can be different for every lender, and contract terms should always be reviewed by a qualified conveyancer or solicitor before you sign anything.
Free resources
Whatever stage of the process you're at, these tools and links are worth having handy.
Calculators
- Borrowing Capacity Calculator, see roughly how much you could borrow based on your income and expenses
- Stamp Duty Calculator, estimate your stamp duty costs based on your state and purchase price
- Loan Repayment Calculator, see what your repayments could look like
- Purchasing Power Calculator, work out your realistic price range once savings and income are factored in
- Refinance Feasibility Calculator, check whether refinancing could genuinely put you ahead
Government schemes and independent guidance
- Australian Government 5% Deposit Scheme, official eligibility and price cap details
- ASIC Moneysmart home loans hub, independent guidance on borrowing and buying
Have a question about your own situation? Get in touch with us and we'll walk you through it.
