Home Loan Approvals

When your home loan has been pre approved or conditionally approved, it means that the lender has agreed to lend you a specific amount for your property purchase - however it could be subject to some factors.

For example, the lender could approve your loan subject to a higher deposit or an extra document required so they can check - such as a contract of employment.

Typically, it means they are willing to lend you the money under certain conditions that they will ask you for specifically. However you are able to be pre approved without conditions as long as the lender is comfortable to do so.

This will allow you to gain confidence in making offers on your desired property as borrowers will generally apply for pre approval upon being ready to shop for a home.

There are potential upsides and downsides to being pre approved. One of the upsides are being favoured by the property sellers because you are already conditionally approved as opposed to a Home Buyer who is not.

Another benefit of being pre approved is that it’s free and will give you peace of mind whilst looking for a property.

The downside to being pre approved is the time limit of typically 3 to 6 months before expiration in which you will need to re-apply. However it is possible to ask for an extension before the designated time period is over - but there isn’t a guarantee that the lender will allow it.

Another downside to conditional approval is if your financial situation changes, you may need to submit extra requested documents or re-apply if it’s a drastic change.

After you have been pre approved, and met all the conditions - if there are any, in order to receive the money, you will need to be formally or unconditionally approved.

Once the lender has what they need, the next step is unconditional approval, which is their final decision to approve your loan without additional requirements like a pre approval.

At this point, it isn’t mandatory to accept the loan - however if you’re happy to proceed the next step is to read and sign the loan.

If you borrow over 80% of the property value, the lender can ask you to pay Lenders Mortgage Insurance (LMI). LMI is an insurance that protects the lender in the event of the borrower defaulting on their repayment.

The lender will organise LMI for the borrower, however behind the scenes, the LMI insurer will need to approve your loan also as they are wearing the risk of the lender.

LMI insurers will factor in your credit score, employment stability and savings history in order to come to a decision of approval.

Home loans can be simple or difficult, and if you’re new to this, it’s a good idea to do some research and educate yourself. Our brokers at TBO are always happy to help with any other questions or concerns.