Seeking approval for your home loan can get complicated. What is pre-approval? What happens after unconditional approval? With so much jargon to navigate, you might be confused about when your loan is actually approved and when you will see the funds to pay for your new home.

In this article, we will explain the difference between conditional and unconditional approval so that you know everything you need to process your home loan smoothly.

What Is Conditional Home Loan Approval?

Conditional approval, or pre-approval, is the first step towards buying a property. When you first submit your home loan application, the bank or lender will ask for supporting documents to consider your case. 

These documents typically include:

  • Recent payslips
  • Recent tax return
  • At least three months worth of bank statements
  • Details of the property you intend to purchase

Essentially, pre-approval is the lender’s way of saying that you meet their requirements to borrow money. However, formal approval is often subject to you finding an eligible property and maintaining your financial situation.

Unless you receive a letter stating your official conditional approval, you cannot assume that you have been accepted for pre-approval.

man signing papers in house
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What Are The Advantages of Conditional Approval?

Seeking pre-approval puts you in a stronger position to negotiate. With an idea of the funds you can spend and a lender’s official acceptance, you’ll have an advantage over your competitors. 

For example:

  1. You and your buyer’s agent will be on the same page at property auctions.
  2. You can start your search more confidently, knowing what is within your budget to make inquiries.
  3. No time wasted visiting homes outside your budget.

However, you should remember that conditional approval usually lasts about three months and is subject to your financial position remaining the same. If your circumstances do change, you can renegotiate your pre-approval with the lender. 

How Do I Apply For Pre-Approval?

Homebuyers should only apply for pre-approval after conducting market research. 

Borrowing capacity: You should have a clear idea of your borrowing power. Use our mortgage calculator to work out how much you can reasonably afford to borrow.

Property market: Do you know where you want to move to? House hunting in your desired suburb will get you one step ahead of the game. 

Deposit: Take time to prepare your deposit. If you haven’t started saving up, it’s best to start sooner rather than later. Ideally, you will need about 20% of the property price.

Loan options: Make sure you know the different kinds of loans available. From variable to fixed-rate, what loan type suits your situation?

If you are looking to apply for pre-approval, make sure you look at RateCloud’s digital mortgages.

What If I Don’t Get a Pre-approval?

Don’t worry if you don’t get pre-approval at one bank; it could be a matter of trying a different lender rather than renewing your property aspirations. Or, sit down with your lender and see where you might improve your application to resolve the risks before reapplying. 

What Is Unconditional Home Loan Approval?

Unconditional home loan approval comes after you have been pre-approved. The lender will offer unconditional or formal approval once they have decided that you meet all their requirements and have no unresolved issues.

Typically, you will need to have settled on a property and passed on the details to the lender before acquiring unconditional approval. It is the final step towards securing the funds to pay for your home.

Remember, you don’t have to accept unconditional approval if the loan terms are not to your liking.

What Happens Next?

When you get unconditional approval, the rest of the journey to securing your new home should be smooth sailing. 

The final steps include:

1. Sign the loan documents.

A week after receiving your formal approval, you’ll be sent your home loan documents. Read through them thoroughly to ensure there are no errors before signing. 

2. Sort out home insurance.

Your property may or may not need insurance. This is the time to find out. 

house insurance papers
Photo by Mikhail Nilov from Pexels

3. Research if you’re eligible for grants.

There might be state-funded grants to help you further financially.

4. Organize a property inspection.

It’s essential to ensure the property is in the same condition as when you signed the contract.

5. Transfer ownership.

Leave this to your legal team; they will organize ownership transfer during the settlement period.

6. Get ready to move in!

You’re all set to pick up your keys and move in.

Further Negotiations

Even though the bank has offered you formal approval, you don’t have to accept the loan terms as they are. There is room to negotiate the loan terms even after unconditional approval.

However, it might result in a complete reassessment of your application and draw out the settlement period. Yet, you should never sign a mortgage if you aren’t happy with the terms.

Get Your Digital Mortgage Pre-Approved with RateCloud

RateCloud will quickly offer pre-approval for your mortgage application so you don’t sit around waiting. We’ll get back to you with initial quotes in as little as 15 minutes. With our digital transactions, the approval process is efficient and cost-effective.

Get started on your digital mortgage pre-approval today.