One of the stages of the home buying process is to check if your lender will approve your loan before you make an offer. You’ll have heard different terms used to describe this process; pre-approval, approval-in-principle and conditional approval are the most common.
Something you should be aware of is that these terms are used by different lenders to explain different types of assessments of your financial position before they give you a loan.
For some, they use it as an affordability enquiry; for others as conditional approval with a lot of checking still needing to be done. Confusing right?
You should always check with a lender what their approval process involves-and exactly what it covers-before you make an offer on a home.
We call the stage before giving you final approval of your home loan “conditional approval”.
One of the common questions we get asked is why should I use a mortgage broker if I can go with a bank? We have a panel of over 25 lenders which ensures that we can get you pre-approval home on your loan swiftly and with the right product that meets your needs.
Obtaining conditional approval requires the full assessment of your situation. We’ll need to ask and establish employment, savings, assets and liabilities, credit reports We’ll ask you to complete a full application and do an assessment, including credit checks, before offering conditional approval.
We’ll verify this information with employers and credit reporting agencies to check your creditworthiness and your ability to repay your loan. Verifying the details you’ve given are correct is one of the conditions we set before offering you formal approval. We may also need to do a bank valuation to make sure the property offers enough security for the loan. We’ll write and let you know what the conditions of our offer are.
We also need to check that there’s nothing that might lead to a change in your financial situation, like a recent job change or reduced work hours.
If it’s been a while between you receiving conditional approval and finding a property, we’d also need to be sure nothing major has changed since you did your full application.
It’s important to know that we don’t offer you access to any money from a loan until you get formal approval.
Home buyers often apply for conditional approval after they’ve finished doing some initial research. You can start the process before you begin house hunting or when you’re ready to make an offer on one.
Once you have an idea of what you can afford to borrow and repay, you can start looking for homes in that price range. If you find one you want to make an offer on, contact us to start the conditional approval process, if you haven’t already.
Your research might include the following activities:
If we offer you conditional approval it means you’re a step or two away from getting formal approval and a loan contract. This can give you the confidence to make a conditional offer on a home if the seller and their sale conditions let you.
Generally, if you’re buying privately (not at auction) you have the ability to set some purchase conditions. For example, you may be able to make your offer “subject to finance” and “subject to pest and building conditions”. It’s a good idea to get your solicitor or conveyancer to look into this for you and give you advice.
When you make an offer subject to conditions you need to set a date they expire. You’ll need to factor in the time it might take for final approval to be given. You should check that time frame with your banker.
If the house you want is being sold at auction you probably won’t be able to make a conditional offer. Auction conditions usually state you must have the deposit on the day and finance secured. Even if you want to make an offer before auction, the conditions are usually the same. You really need to get formal approval for your loan before bidding at auction or making an offer under auction conditions.
You should always seek independent legal advice and check the sale conditions before making an offer.
If you want to get a personal individual assessment and discuss what your options are? Contact us on 1300 CAP ONE (227 663) or fill in our Free Assessment Form.