What exactly is conditional approval?
Conditional approval is a statement from a lender that you will be approved for a home loan up to a certain dollar limit, provided your application meets pre-agreed conditions.
Conditional approval, also referred to as loan pre-approval, is a statement from a lender that you may be approved for a home loan up to a certain dollar limit, provided your application meets pre-agreed conditions.
Mortgage pre-approval typically lasts 90 days; it can be shorter or longer depending on the lender. During this time, you can go house hunting or join auctions with confidence that you have a pre-approved home loan in your pocket.
Benefits of a home loan conditional approval
Conditional approval offers several advantages that can make homebuying a much easier and smoother experience for potential buyers. Some benefits of a pre-approved home loan include:
Know how much you could borrow
Figuring out the right budget is one of the more difficult parts of buying a house. Setting your budget too high could make it hard on your finances. It’s important to look at your finances carefully. Consider your income, expenses, and other financial considerations that could affect your ability to manage mortgage repayments plus ongoing home costs.
Tools like an online borrowing power calculator can give you an idea of what your price range should be, but it’s not wholly accurate.
With a pre-approved home loan, you’ll get a real look at your maximum borrowing capacity. This means the highest loan amount a lender is potentially willing to provide. This will give you a set price range that can help you create a more accurate budget.
Using an online home loan calculator, you can see how much your repayments could be with a certain loan amount. This will help you figure out the perfect price range when it’s time to go house shopping.
Show sellers and agents you’re a serious buyer
When you have a pre-approved home loan, it signals to sellers and real estate agents that you’re ready to buy and aren’t simply window shopping. A pre-approved home loan tells the seller you’re in the process of securing your home finance, which lessens the possibility of the sale falling through due to failure to finance.
During negotiations, you’re in a good position to bargain. Because you have financing mostly ready, sellers may also be more amenable to your conditions. It also helps that when you have financing ready, they can close the sale sooner.
Streamlined home loan application process
The approval process for a home loan can be much quicker when you already have a pre-approved loan from the same lender. Since they already have some of your information, all you have to do is submit additional documents and requirements. This cuts the loan application process time and makes it more convenient for both you and the lender.
The quicker you can get your home loan approved, the quicker you can close on your home purchase. If you don’t want to wait days or even weeks to get approved for a home loan, getting a conditional approval first could hasten the process significantly.
Getting conditional approval for auctions
Securing financing when buying a home at an auction is incredibly important. Unlike a private treaty sale, you can’t pull out of the deal because you didn’t get finance approval. At an auction, if you can’t settle a purchase, you’ll be in breach of your contract with serious implications that could range from losing your hard-earned deposit to facing hefty fees or legal penalties.
Getting conditional approval or a pre-approved home loan before you bid for a home is a good idea. It gets you approved in principle by a lender, making it easier for you to apply for your actual home loan. It also gives you the confidence to bid as you won’t be worried about whether you can afford a specific home or not.
Take note, the property you purchase at auction does affect your loan eligibility. Make sure the property you want to buy is residential, in good condition, urban or suburban, reasonable size, and not hazardous. If you want to be completely sure about a property you are considering bidding on, just ring one of our friendly lending specialists to discuss whether it qualifies.
How to get a pre-approved home loan
At loans.com.au, the process of applying for a loan is simple. You can apply for a pre-approved loan online. Simply complete the online form and pass any necessary documents. It's a quick and easy application you can complete on your phone or personal computer— you can be done in just minutes.
You can also speak with our friendly lending specialists, who would be more than happy to walk you through the process over the phone. It’s a good idea to have your financial documents ready beforehand so there aren’t any delays with your application.
Once we’ve received your home loan pre-approval application, we’ll review your details and see which loan product best suits your needs. Although a pre-approved loan doesn’t guarantee home loan approval, it’s useful to have in your arsenal as you go on your homebuying journey.
If you want to know more about home loan pre-approval or see your home finance options, get in touch with us today by calling 1300 804 152.
Find out in under 2 minutes if you qualify for one of our home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
