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What exactly is conditional approval?

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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.

It is especially important if you are buying a home at auction, in fact, it’s so important that at loans.com.au we call it “Auction Approval”.

This is because, unlike a private treaty sale, when you buy a home at auction, there is no “finance clause” which allows you to pull out if you can’t get finance.

If you can’t settle the purchase you will be in breach of your contract with serious implications, starting – but not ending - with the loss of your hard-earned deposit.

Getting conditional approval before you bid for a home at auction is a no brainer.

But it’s not enough. To get real peace of mind, you also need to understand the conditions so you can ensure you meet them.

Our conditions

At loans.com.au, our Auction Approval isn’t just a vague promise.

To get Auction Approval, you will need to talk with one of our lending specialists and go through our normal application process.

Along the way, you will supply us with your financial details and supporting documents so there are no nasty surprises when we come to process your final application.

This means that once you have received Auction Approval, the main condition you need to meet is to buy a property which meets our lending policy.

When you come to apply for final loan approval, we will order a valuation of the property to check that it is the type of property we lend against.

Our lending Policy

Below, we have put together a summary of our lending policy. This isn’t comprehensive but if you follow these rules you shouldn’t have any problems. It may look like a lot of rules but it really just boils down to buying a regular home in a residential area.

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.

Property Checklist

1. It’s residential - Make sure the property you buy is for residential use only. This means you or a tenant will live in it.

2. Good condition - Check that the home is well maintained, free of building defects and would be easy to resell.

3. Urban or suburban - We don’t lend against farms or other remote properties. Your property should be connected to water and the electricity grid, smaller than 10 hectares and located on a sealed road.

4. Reasonable size - If you are buying in an apartment block which is more than six stories high, make sure the apartment has a living area floor size of at least 50sqm, excluding any balconies or car space.

5. Not hazardous - Don’t buy a home on contaminated land or within 50 metres of High Voltage Transmission lines.

6. Building Contract - We will only lend against vacant land if you have signed a fixed-price contact with a builder to build a home on it.

So there you have it. Get Auction Approval, select a home which complies with the rules above - like most Australian homes - and bid at auction with confidence!

External expert

Miriam Sandkuhler is the CEO and a Buyer’s Agent,
Property Mavens - a specialist property advisory firm based in Melbourne

Top 3 auction buying mistakes

1. Too many buyers don’t have formal conditional loan approval in place before bidding. They assume it’s easy to secure finance and come unstuck after they have bought! Know the exact maximum you can spend before bidding.

2. Not knowing the prices in the local area for the property type, size and style you want to buy can bring buyers unstuck. Most buyers fail at auction because they don’t know how to price property properly or how to analyse ‘comparable properties’.

3. Many buyers don’t know auction terminology. Auctioneers call auctions differently and they don’t all use the same terminology, so it’s important to understand what they mean when using phrases that you may not be familiar with. If in doubt, engage a Licensed Buyer’s Agent to bid at the auction for you.

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.

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