Home Buying

What is conditional approval for a home loan?

Luke Harris
Nov 11, 2021
Yard Financial Pty Ltd | ACN 623 357 513 | Australian Credit Licence 509481

Table of Contents

Looking to buy a property and not sure if you need home loan pre-approval?

Getting conditional pre-approval from a lender can give you a better chance of securing a property before another buyer, and it also gives you a good idea how much you are able to borrow.

Read our Q&A explainer to get an overview of how conditional pre-approval works, so you know what to expect when you apply.

What is conditional approval? 

Conditional approval, also known as ‘pre-approval’ or ‘approval-in-principle’, is a lender’s estimate of how much you could afford to borrow for a home loan, provided you meet certain conditions. 

It gives you a good idea how much you’re eligible to borrow for a home loan based on the criteria of a specific lender, but it is not a guarantee that you have secured a home loan. 

If you meet the lender’s criteria for conditional approval they will provide you a letter confirming how much you are likely to be able to borrow. You can then present this document to a seller or to auction confirming your conditional approval status. Be aware that conditional approval only lasts for a short timeframe, typically 90 days. You will have to reapply for pre-approval again if your initial pre-approval expires.

There are a number of advantages to having pre-approval or approval-in-principle.

Why get home loan pre-approval?

Getting home loan pre-approval has a number of advantages in your property investment journey, specifically:

  • Letting sellers know you are a serious buyer who will not delay the purchase process getting approval.
  • Having a firm idea of what properties you can afford, based on the amount you get approval for.
  • Giving you additional negotiating power, based on your status as a buyer with pre-approval, especially against those without this clearance.

You may be wondering if you can make an offer and secure a property with conditional approval.

Can I buy a property with conditional approval?

You can make an offer on a property if you have conditional approval, but you still need to go back to your lender to get unconditional or final approval. This is a more detailed assessment of your financial status, which also includes a formal valuation of the property you want to purchase by the lender. This also applies to bidding on a property at an auction.

Let’s now understand when in the property buying process you should apply for conditional approval. 

When should you apply for conditional approval?

You can apply for conditional approval from a lender when you have done your research and are clear you can afford to purchase a property. You should also be clear what products the lender offers, know your ballpark borrowing power as well as the regular repayments you will need to make. 

Tip: Use our handy calculators to estimate your home loan borrowing capacity, the value of the home you can afford (assuming you are buying with a 20% deposit) and your monthly repayment.

You may also be wondering if a loan will be denied after you have been given conditional approval.

Can a loan be denied after conditional approval?

Conditional approval or pre-approval from a lender is not a guarantee you will obtain a loan, and you could be denied if your circumstances have changed. Factors that could cause this include losing your job or becoming unemployed, your credit rating changing or you having taken on new debt since first applying for conditional approval.

Let’s now look at what the conditional approval process involves.

What does the conditional approval process typically involve?

To give you conditional approval status your lender will require a full picture of your personal financial details, including:

  • Your income, wages or salary.
  • A list of all your current assets, such as other properties you own.
  • An idea of all your debts, including credit cards and other loans.
  • A credit check, as part of the pre-approval process.

Wondering what happens after you obtain conditional loan approval?

What happens after getting conditional approval?

If you’ve been given conditional approval for a home loan, the next step is unconditional or final approval. You move to this step after having your offer for a property accepted by the buyer, or if you have secured a property at auction.

The lender will then verify the information you provided in the pre-approval stage, as well as carrying out a property valuation, to ensure your loan doesn’t exceed the true value of the property. This can take anywhere from a day to one week, depending on your lender. They will also confirm the conditions of your home loan, including if you require Lenders Mortgage Insurance (LMI).

Wondering how to apply for your first home loan

Apply for a home loan pre-approval in 3 easy steps 

With Yard it's a simple, three step online application you can complete anytime, from any device.

Step 1
Tell us about yourself. Securely share your personal financial details. We verify your identity, credit history and financials online.

Step 2
Design your loan: Design the features of your loan to match what works best for you.

Step 3
Get approved! When all of your details check out, we provide you with the decision on your loan!

We then settle your loan and take care of the rest so you secure your dream home asap!

Have any questions about getting approval for a loan with Yard? We’re happy to help, and our local team are available to chat at a time that suits your schedule.

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