Going to bid at an auction without getting pre-approval for a home loan first is a bit like going shopping without a budget or even a wallet.

Here are four reasons you should always make sure you’re pre-approved before you raise your hand at an auction.

What is home loan pre-approval?

Pre-approval for a home loan, also known as conditional approval or approval-in-principle, is a type of preliminary approval from a lender. It shows you what that lender will let you borrow based on the information you give them about your income and expenses.

Pre-approval is not a total guarantee, it’s usually “conditional” on:

  • You signing a contract to buy an acceptable property type, and
  • an independent valuation of the property you make an offer on

The terms and conditions around pre-approval can vary between lenders, but generally, pre-approval is only valid for a set period, such as “90 days from application”.

Why do I need to get pre-approval before attending an auction?

There are many reasons to get pre-approval before attending an auction, including: 

  1. You’ll know how much you can spend – Pre-approval gives you a clearly defined budget. It takes all the guesswork away from what you may be able to afford or what a lender will offer you.
  2. It makes your house hunt easier – House hunting isn’t easy. Usually, you’ll need to spend some time searching before you have a clear idea of exactly what it is you want to buy. Pre-approval can help you fine tune your house hunt because you’ll know what’s realistic, and you can fine tune the kind of property you’re searching for and area you search in accordingly.
  3. It could make you a more attractive buyer – Real estate agents are more likely to take you seriously if you’ve already started on the financial path to homeownership by seeking pre-approval. It shows your finances are in order, so they’ll see you as a qualified buyer, who’s ready to act when the right property comes along.
  4. You’re able to buy property – If you apply for pre-approval, you’re one step closer – financially speaking – to actually buying your dream property. While the approval is “conditional”, pre-approval gives you the chance to confidently bid at auction and make offers on private sales “subject to finance”. This can help put you ahead of the competition if the situation is competitive and you need to act fast.

What do I need to know about bidding at auction with pre-approval?

You can bid confidently at auction with pre-approval for a home loan knowing exactly what your budget is. Bear in mind that if you’re the highest bidder and win the property, you’ll also need to be able to pay the deposit directly after the auction. Then you’ll need to go back to your lender to go through the process of gaining full approval.

You don’t always need to use your cash to pay a deposit upon winning at auction. A deposit bond may be a better option for you. A lending specialist who understands property lending thoroughly and who works closely with real estate agents can provide strong guidance on your options.

Obtaining full approval for your home loan will typically involve a property valuation. So it is very important to do your research up front and not bid more than the property’s fair market value.

Things to remember with home loan pre-approval

  • Pre-approval is not a complete guarantee. You’ll still have to complete the application process and provide your documents to the lender.
  • Pre-approval doesn’t last forever but usually for a set time – often 90 days.
  • If you apply too often for pre-approval and don’t take up a home loan it will go on your credit history. So it’s best done when your finances are in order and you’re serious about your property search.
  • You can bid at auction with pre-approval, but if you’re the highest bidder you’ll need to pay the deposit after the auction.


At LJ Hooker Home Loans our aim is to make applying for and understanding your home loan simple.

We’re a genuine alternative to the banks, with local lending specialists who offer personalised home loan guidance to help you make the right choice. Whether you’re buying to live, invest, or simply want a better deal on your home loan, we make getting a home loan simple.

Download our guide to buying or investing in property

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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.