There’s no better feeling than receiving an approval on your home loan. But as a prospective home buyer, you need to know that approval doesn’t necessarily mean approval. There’s a lot of jargon to navigate, and it’s crucial to know what separates conditional approvals from unconditional approvals.
Hey everyone, Michael here from Lendstreet – helping you make informed decisions about your home loan and finance needs whether you’re a first-time buyer or refinancing, nothing can compare to seeing that stamp of approval on your home loan because it means you’re almost ready to get your new life underway in the property you’ve always dreamed about. But in most cases, the first stamp of approval is usually conditional, not guarantee. So, what does that mean?
Well, that’s what I’m going to guide you through today because with home loan commitments in Australia increasing at a rapid rate, you don’t want to be part of the unlucky few who suffer the heartache of not getting approved. I’m going to answer some of your most burning questions including what happens after an unconditional approval and whether you can be denied after getting a conditional approval. So stay tuned. Let’s start with what conditional home.
Conditional Home Loan Approval
loan approval is. Also known as a pre-approval, a conditional approval is when the lender gives you an idea of how much they’re willing to lend you based on a preliminary assessment of your financial situation. This assessment will take things like your income, savings, debts, and employment histories into account. Once you’ve been conditionally approved, you will then need to provide the lender with additional documentation so they can give you a final decision on the loan amount.
So essentially, if you’re receiving a conditional approval on your home loan, you’re one step closer to securing your property. But there’s no obligation at this point to accept that home loan or for the lender to lend you that amount because they’ve only agreed in principle to lend you the money. Most mortgage brokers including myself, will tell you that applying for conditional approval at the beginning of your home-buying journey is pretty important step because it puts you in a better position when navigating the housing market. It shows real estate agents that you’re serious and ready to negotiate based on the conditional approval offer which essentially, gives you a leg up over the competition.
You’ll also have a clear idea of what your budget is and what you can afford so that you don’t poke your head into an unrealistic open house. Instead, you can make offers with the confidence that you can afford them. You should know however, that conditional approval doesn’t last forever and finding the right mortgage broker will help home buyers understand time frames and what must be in place when applying. Generally, a conditional approval lasts three months but this can change depending on the lender. Okay, now let’s move.
Unconditional Home Loan Approval
on to an unconditional home loan approval.This is sometimes also referred to as a formal loan approval or full approval because it means that the lender has everything they need to know to make a final decision. So you’re at the point where you can put the champagne in the fridge as the lender is officially willing to lend you the money and there’s no more conditions left for you to satisfy. After your being unconditionally approved by your lender, you can begin to put everything in place and finalise the whole process but you should know that you don’t need to settle for the terms of your unconditional approval right away. Formal approvals can be adjusted and tweaked if you have any problems. This will mean though, that your lender may want to do a full reassessment of the home application which could result in you getting a new unconditional letter being sent to you essentially, starting the process again from scratch. Of course, this will add more time to the settlement process but you should be happy with your home loan before signing. It’s one of the biggest decisions of your life, so get it right the first time. As mentioned.
Can formal approval for a home loan be revoked by the lender after it has been granted?
earlier, one of the questions that comes up quite frequently is whether a lender can deny a home loan after it’s been unconditionally approved. Generally, after home loans are given the all-clear with the unconditional approval, no more problems should arise. But if there is a sudden change in your financial situation, the lender may revoke their final approval.
For example, let’s say you unexpectedly lost your job after receiving a formal approval and that case your lender is going to question your ability to pay back the loan so while revoking a final approval is very rare, it is still possible. That’s pretty much all you need to know about the differences between a conditional and an unconditional approval.
I hope this has helped you understand all the jargon and giving you a bit more insight into the home loan process. But if you’re ready to start your home buying journey and have a few more questions, feel free to leave a comment below, and we’ll get in touch. Otherwise, remember to like and subscribe and I’ll see you next time.