Conditional Approval: Here’s What You Need to Know

If you’re aiming to secure a home loan, it’s important to understand that there are many different steps and milestones involved. One key stage in your home loan journey is obtaining conditional approval from al ender. But what does this actually mean - and, crucially, how long does this pre-approval last? In this article, we’re breaking down conditional approval and how it works, so you can move forward in your home-buying venture with the insights you need to succeed.

What is Conditional Approval?

First up, let’s look at what we mean by conditional approval. Also known as pre-approval, conditional approval is when a lender indicates that you may be approved for a loan up to a certain amount, based on conditions being met. It’s important to be aware that conditional approval is not a guarantee of a loan, but it does show sellers that you’re a serious buyer with likely financing.

What’s the Purpose of Conditional Approval?

 Conditional approval serves two main purposes:

• An understanding of how much you can borrow: Conditional approval gives you a clearer idea of the amount you may be able to borrow, helping you focus your property search on homes that fit your budget.
• A better position to negotiate: Once you have conditional approval, it can be easier to negotiate or bid for a property, as you’ll be a more attractive buyer compared to those without this pre-approval

What Factors Can Affect the Validity Period?

There are a few different factors that can influence how long your conditional approval remains valid:

• The lender’s policy: Every lender will have different policies and timeframes for the validity period
• A change in your financial situation: If your financial circumstances change significantly, your approval may need to be reassessed.
• Market conditions: Economic shifts in the market can result in changes to lending criteria and interest rates, impacting validity periods.

What Happens When Conditional Approval Expires?

If your conditional approval expires before you make a home purchase, you’ll typically need to reapply. This will involve submitting your financial information again, using up-to-date details for accurate assessment. It’s important to note that if your circumstances have changed, your approval conditions may also change.

Keeping Track of the Validity Period Expiry Date

To avoid coming unstuck, it’s very important to keep track of when your conditional approval is set to expire. Here are some tips:

• Make a note of the date immediately: As soon as you receive your conditional approval, clearly mark the expiry date in your calendar.
• Stay updated: Keep in touch with your lender to remain up-to-date with any changes.
• Be ready to reapply: If your expiry date is coming up and you still haven’t found a property, it’s a good idea to prepare your financial documents to reapply.

Maintaining Your Eligibility

To maintain your eligibility for a loan during the conditional approval period, consider the following:

• Aim for stable employment: If possible, it’s best to avoid changing jobs or careers, as lenders value stable employment when considering approval.
• Keep your credit record clean: Ensure your credit profile stays healthy by paying bills on time and avoiding new debts.
• Let your lender know of any changes: If your financial circumstances change, be sure to make your lender aware immediately.

Being in the know about conditional approval will help you avoid getting caught out by unexpected expiry dates. Make sure you understand what’s involved in obtaining conditional approval and aim to keep your finances in good working order throughout this period.

By staying informed and prepared, you’ll be ready to dive into the home loan process with more confidence, bringing you one step closer to finding your dream home.

Keen to learn more about the home-buying process? Check out our other articles and stay in the know about all things home loans.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000. 

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.