Home loan pre-approval (or conditional approval) means that a specific lender has agreed in principle to lend you money towards the purchase of your home, but hasn’t proceeded to full or final approval. Getting pre-approval for your home loan allows you to enquire with confidence.
Pre-approval does not mean that you are 100% guaranteed to successfully receive the exact amount of money that you were pre-approved for. When the final approval process begins, the lender will get a valuation completed on the property; this can hinder the amount of money that gets officially approved for. For example, if you have been pre-approved to purchase a house of up to $600,000 in value (price inclusive of stamp duty and other fees), you might find your ideal property and offer exactly $600,000. The bank will then get a valuation done, and if the property valuation comes in lower than that pre-approved amount, your borrowing capacity can decrease.
If you are wanting to sign a contract, it is recommended that you liaise with your broker or lender before signing. It is also recommended to subject the purchase to finance, which protects you if something goes wrong with the lender.