Understanding Home Loan Pre-Approval Or Conditional Approval

Key Takeaways

Home loan pre-approval gives you a clear picture of what you can borrow, making you more confident during your home search. While it doesn’t guarantee final approval, it’s a crucial step in the loan process. Once you’ve chosen your dream home, you move on to final (unconditional) approval to secure the necessary funds for purchase.

What Is Home Loan Pre-Approval?

A home loan pre-approval, is an agreement, in principle, by a lender to provide you with funds for purchasing a property. A pre-approval has not yet hasn’t proceeded to full or final approval.

It’s only an indication from a lender that they are willing to approve your loan when you lodge a full application. The lender is under no obligation to approve your loan formally when you find a property.

A pre-approval offers valuable insight into your borrowing capacity, providing an estimate of the maximum funds available for your property purchase.

Should You Get A Home Loan Pre-Approval?

By getting a home loan pre-approval, you get to know how much you can borrow so you save time and effort to house hunt for properties that fit your budget. Besides this, there are other benefits to getting pre-approved:

• Sellers will view you as a strong buyer. The seller will be confident your offer is valid, as your financing is less likely to fall through. This makes your offer more competitive, especially when the seller has multiple offers.
• Having a pre-approval speeds up the final stages of the application process, since it means most of your financial information will already be in the lender’s system by then.

However, a pre-approval does not guarantee that you will get final or unconditional approval for a home loan. You still need to go through the lending process to get approved.

Get the help of Home Loan Experts in obtaining a pre-approval for a home loan. We care about helping you take the right step toward getting the property you want. Call us on 1300 889 743 or complete our free online assessment form today.

How To Get Pre-Approved For A Home Loan

The process of getting pre-approved will vary depending on whether you go straight to a lender or take the help of a mortgage broker.

To apply for a pre-approval through a mortgage broker, like Home Loan Experts, you need to:

• Complete and sign our short application form.
• Provide evidence of your income, savings and debts, like credit cards and other loans, to the mortgage broker.
• The broker will complete a preliminary assessment and recommend several suitable lenders and loans.
• We’ll lodge your application with your chosen lender.
• The lender will complete an assessment of your situation and accept or reject your application.

Fast Track to Approval: Your Home Loan Checklist

A well-curated checklist to improve your chances of a home loan approval.

What Documents Are Required For Home Loan Pre-Approval?

The documents required for a home loan pre-approval are:

• A valid, government-issued identification
• Proof of income
  • PAYG: Two most recent payslips
  • Casual: The most recent assessment from the Australiana Tax Office
  • Self-employed: ATO Notices of Assessment and tax returns from the past two years.
• Income statements
  • Income over a certain term
  • Savings account
  • Term deposits
  • Expenses
• Assets and liabilities statements
  • Proof of your assets including properties, vehicles and stock
  • Proof of liabilities including existing home loans, car loans, student loans and other unpaid debts.

How Long Does The Pre-Approval Process Take?

The time it takes to get pre-approved for a home loan can be from a few days to a couple weeks. The timeframe varies depending on factors like:

• Complexity of the loan
• Providing the right documents and any additional information required
• Lender’s workload

How Long Do Pre-Approvals Last?

A pre-approval can last from three months to six months.

Conditional Approval vs Final Approval: What’s The Difference?

Unlike conditional approval, final or unconditional approval is given once all the banks’ loan conditions have been met.

This is the final guarantee that you’ll receive finance for a property.

A bank will decline a final approval only if they find a discrepancy that has been completely missed or they have reason to suspect something like fraud.

Once you’ve won at auction or a private seller has accepted your offer, you may have a one- to three-week grace period to get your deposit and other finances in order.
During this time, you can check with your lender to ensure they honour the agreement.

Even if you don’t have this grace period, contact the bank and make sure they are still financing your loan.

If you haven’t already done so, you can ask for your final approval at this time.

For more information, please visit our page on conditional approval vs final approval.

What Are The Conditions Of Final Approval?

Pre-approvals have conditions that must be fulfilled before the loan becomes formally approved.

The lender will assess all your paperwork and will decide to offer you a loan based on the chosen property, without any further conditions to satisfy. The lender will assess the following before you get an unconditional or final approval:

• Financial documents (income, debts and liabilities)
• Credit history
• Valuation of property
• Location of property
• Ability to make repayments

What Should You Do Once You’ve Submitted Your Application?

Once you’ve submitted your home loan application, you should make sure it has adhered to bank policy.

To do this, you can ask your mortgage broker or the lender:

• Did the credit department accept my application?
• Has the lenders mortgage insurer approved my application?
• What are the conditions of approval?
• Can I satisfy the conditions of approval?
• Can I satisfy the conditions before I make an offer on a property or when going to auction?
• Can I bid at auction in the knowledge my loan will be approved?

Please be aware that interest rates and lending policies are subject to change. If they do, even a formal pre-approval may no longer be vaild.

Be sure of current rates and policies before going to auction, preferably the same day or as close to it as possible.

The lenders will most likely not notify you of these details unless you ask.

To find out more about this, see our page on bank policy and lender guidelines or contact us here at Home Loan Experts.

You may enquire online for free or call and speak with one of our specialist brokers on 1300 889 743.

Common Reasons For Declining Final Approval

There are several reasons why your loan may be declined when you apply for formal approval.

• The pre-approval was worthless because it was an ‘on-the-spot’ or system-generated approval.
• The lenders mortgage insurer declined the application.
• The security of the property was unacceptable.
• The pre-approval expired.
• Your circumstances changed, like a change in job, getting approved for a car loan, or having a baby, so your application has to be reassessed.
• Most lenders tweak their lending policy monthly, so they might approve the loan only if it meets their new requirements.
• If interest rates rise, then the maximum amount you can borrow when getting an unconditional approval could decrease.

How can we help?

Our mortgage brokers have worked in the credit department for major lenders.

Their high level of knowledge and experience means they know which bank will approve your loan.

We know which lenders offer reliable pre-approvals and how to get the other lenders to fully assess your application.

Don’t risk losing your deposit at auction!

Please complete our free online assessment form or call us on 1300 889 743 and one of our mortgage brokers can make sure you get the finance you need to purchase a property.

We're Here To Help

If you’re in the market to buy a home or an investment property, Home Loan Experts can help you get pre-approved. Our mortgage experts are specialists in bank lending policies and know how each bank treats different loan applications. Call us on 1300 889 743 or complete our free online assessment form today.