Pre-Approvals vs Live Deals: What First Home Buyers Need to Know

One of the most commonly misunderstood areas is the difference between a pre-approval and a live deal - and how this can impact the speed and success of your home purchase.

In this guide, we'll explore what each term means, how they fit into your home buying journey, and why using professionals such as a mortgage adviser and lawyer is vital to avoid costly mistakes.

What is a Mortgage Pre-Approval?

A mortgage pre-approval, sometimes called a "conditional approval", is a formal indication from a lender that they are willing to lend you a certain amount of money, based on an initial review of your income, expenses, and overall financial position. This is usually issued before you have found a property to buy.

It's important to understand that a pre-approval is not a guarantee. It simply shows what you could be eligible to borrow if your circumstances remain the same and the property you wish to buy meets the lender's criteria.

Why Pre-Approvals Matter for First Home Buyers

Having a pre-approval in place does more than just give you a number to work with. It shows real estate agents and vendors that you're a serious buyer, helps you set a realistic property search budget, allows you to move quickly when the right home becomes available, and reduces stress and time pressure during the offer and negotiation process. From a mortgage adviser's perspective, a pre-approval helps to surface any potential issues early, whether that's credit history, income reliability, or deposit size, so that these can be addressed before you're in the thick of negotiations.

After help to obtain a Pre-Approval? Make use of our Free Planning Meeting to start the process.

But Be Aware: Bank Pre-Approvals can be Restricted

From time to time, banks in New Zealand may limit or pause new pre-approvals as part of managing their lending volumes and complying with Reserve Bank loan-to-value ratio (LVR) restrictions. For example, during periods of heightened demand or regulatory tightening, lenders may temporarily stop offering pre-approvals for high-LVR lending (those with deposits under 20%).

This means that pre-approvals are not always guaranteed to be available - and even when they are, they typically expire within 60 to 90 days. It's critical to understand the expiry date and ensure your finances remain stable during this time.

A good mortgage adviser can help keep your application updated and re-submitted as needed to ensure your pre-approval doesn't lapse before you're ready to buy.

What is a Live Deal?

A live deal occurs when you've found a specific property and are either making an offer or are under contract. At this stage, the lender will assess both your financial situation and the property to ensure it meets their security criteria.

The key difference between a live deal and a pre-approval is that a live deal is time-sensitive. You'll typically have a limited number of working days (often 10 to 15) to secure finance approval once your offer has been accepted.

This is why having a pre-approval in place beforehand can significantly reduce stress - you'll already have most of the documentation ready, and the lender has already conditionally approved you. All that remains is for them to assess the property.

How Banks Assess Properties

Even if you have a pre-approval, banks still need to approve the property itself. They'll typically look at the registered valuation if required, the location and type of title, whether the property is leasehold or freehold, any property-related risks such as flood zones or cladding issues, and the construction type and any unconsented works. This is one reason why it's critical to always seek legal advice before making an offer, particularly if you're buying at auction or under time pressure.

The Role of your Mortgage Adviser

Getting pre-approved isn't just about ticking boxes - it's about understanding how much you can realistically afford and which lenders are a good fit for your situation.

An experienced mortgage adviser can help assess your affordability and borrowing power, identify which banks are currently offering the best terms, guide you through documentation requirements, flag any issues that might hinder your approval, and reapply or extend your pre-approval if it expires. This upfront guidance is invaluable in avoiding disappointment, particularly if you've already emotionally committed to a property.

Avoiding Disappointment: Common Pitfalls to Watch For

Many first home buyers assume that if they can afford rent at a certain level, they'll be fine with a mortgage at that amount. But banks look at things differently - including your expenses, debt levels, deposit size, and long-term income stability.

Learn More: Want To Afford Your First Home Mortgage? Make Sure You Have a Monthly Surplus

Here are some common pitfalls to avoid:

• Overestimating borrowing power: Always get feedback from an adviser before house-hunting.
• Letting your pre-approval expire: If your pre-approval is more than 3 months old, it may no longer be valid.
• Making unconditional offers without advice: Always run the property past your lawyer and adviser before going unconditional.
• Forgetting about the property itself: The bank must accept the property as suitable security.

Managing your Time Frame Wisely

With New Zealand's fast-paced market, particularly in regions like Auckland, Tauranga, and Wellington, buyers often feel rushed to make an offer. Without a pre-approval, this can become a stressful scramble to get your finances sorted in time.

By contrast, having a valid pre-approval means you're ready to act when the right home appears - without compromising due diligence or making rash decisions.

Keep Your Options Open with Smart Preparation

Remember that mortgage lending is dynamic. Banks change their criteria, interest rates shift, and government policy can impact what's possible.

By preparing early, staying informed, and working closely with professionals, you put yourself in the strongest position to secure your first home successfully - and confidently.

Make Your First Move Count

If you're beginning your home buying journey, the best first step you can take is to speak to a mortgage adviser about your borrowing potential. With expert input, you'll avoid false starts and ensure you're shopping within your means - and with a solid plan.

Pair this with legal advice before making offers and you'll be making decisions with your eyes open, not fingers crossed.