Conditional Vs. Unconditional Finance Approval

There are various types of finance approval you may go through, so it’s important to understand the difference between conditional approval and unconditional approval.

When purchasing a home, the finance process can seem quite tricky if it’s your first time. It’s important you ask questions during your homeownership process to your Broker if you are unsure of the meaning or purpose of a finance stage. The difference between “Conditionally Approved” and “Unconditionally Approved” are finance terms we’ve noticed that our homeowners are unsure of until they reach the finance approval stage. If you understand the difference between Conditional and Unconditional when you get to the stage, it will decrease the chances of disappointment, frustration and heartache (speaking from experience!) 

If you’re in a rush, we’ve broken down the difference:

Conditional Approval: the Lender has looked at your application but you are required to go through further assessment and must meet certain conditions to receive your home loan.

Unconditional Approval: your loan has been approved and assessed by your Lender and you are ready to purchase your home. 

Conditional Approval

Conditionally approved is the step before being unconditionally approved. In basic terms, conditionally finance approved means you may be approved in principle, but the conditional approval isn’t guaranteed. Your loan has been assessed and initially approved by your Lender, but you are not quite at the formal approval stage. 

When you are conditionally approved, there are conditions that must be met and shown to the Lender in order to become unconditionally approved. These conditions could be that the Lender has requested further information to verify your employment by providing updated payslips, updated bank statements to verify your payslips, valuation of the property being purchased or the executed contract of sale. 

Whilst being conditionally approved is exciting, as you are one step closer to becoming a homeowner, you have not reached the finish line yet. If your Broker requests any additional documents, it’s important you provide the requested information as soon as possible. 

QPG Big Tip – If you are asked to submit documents for the Lender, try your best to submit the documents on the day you receive the request as it shows how eager you are. It’s always better for you to be waiting for the Lender for an update than the Lender waiting for you when submitting documents. 

If you are conditionally approved, you can now begin your house hunting journey with confidence as you will know approximately what is within your financial ability. 

There are many benefits to focusing on finance and the process of conditional approval before you begin searching for your new home.

Sorting out your finances prior to house-hunting will present you to sellers and agents as a more serious and genuine buyer as you have taken the initiative to clarify your financial abilities.  In addition – it will provide you with more confidence when making offers as you will be already aware of your borrowing limit when making an offer on a house, especially when bidding at an auction.

The most important thing to take away: unless your Lender provides you with a Formal Letter stating your loan is Conditionally Approved with Conditions that are required to be met, don’t assume your home loan is close to the end!

Unconditional Approval

This is when the celebration begins! When you become Unconditional, this means you are fully approved with no conditions (and no unresolved issues). 

In basic terms, Unconditional means that your Lender has thoroughly assessed the documents you have provided, they’ve made the final decision and are willing to lend you the money based on what you have provided. All the hard work is done, and you are almost a homeowner! 

So, what is the next step after unconditional? To put it simply: 

  • Sign loan offer documents
  • Organise building insurance
  • Apply for any Government Grants (if eligible)
  • Complete final check of the property (if applicable)
  • Settlement – you are officially a homeowner!

Although conditional approval and unconditional approval are different stages of the finance process, there are some similarities. Conditional and unconditional approval have an expiry date, which is generally 3 months from the issued dates, unless your Broker says otherwise.

If you have conditional or unconditional approval, it’s important your financial situation doesn’t change too much as any change could affect the whole application and you may need to start again or be knocked back from your original loan! Financial situation changes could be inclusive of change of employment, decrease in work hours and new debts (e.g. car loan, personal loan, credit cards, etc).  

If you are interested in assessing your current financial situation or looking to receive some financial advice, please contact us on 1300 248 514 so we can connect you with one of our Brokers.

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