The difference between pre-approval, conditional and unconditional home loan approval

Conditional vs unconditional home loan approval feature image

Getting approval for a home loan doesn’t always mean you’re in the clear. Learn about the different types of approval.

When you’re going through the home loan process, there are various stages of approval before your home loan actually gets to settlement. This can be fairly confusing, as it can be tough to understand when you’ve actually been approved and can breathe a sigh of relief. In general, your approval for a home loan can go through three stages.

Pre-approval

Pre-approval is nothing more than a computer-generated yes or no to let you know if you’re likely to be approved for the amount you’re borrowing. Pre-approval takes into account the financial information you’ve provided to the lender to determine whether or not the amount you’re looking to borrow is suitable.

Pre-approval is in no way binding to either party. Just because a lender has pre-approved you for a certain amount, you are under no obligation to take it. Likewise, a lender is under no obligation to give you a home loan based upon pre-approval. In essence, pre-approval is just giving you and the lender a rough idea of the size of home loan you’re likely to qualify for.

Nevertheless, pre-approval is handy to have. When you’re house hunting, already having pre-approval for a specified amount can help show vendors that you’re serious.

While many buyers will attend and bid at auction with only pre-approval, it is worth being wary. Remember, just because you’ve been pre-approved, it doesn’t mean your home loan will make it to settlement without any difficulties. Pre-approval definitely gives you firmer footing to bid at auction, but should you have the winning bid, you can still come unstuck if your pre-approval doesn’t make its way to unconditional approval.

Conditional approval

Conditional approval means a lender has approved your home loan in principle, subject to certain conditions being met. At this stage, a lender has received the documentation supporting your application and has actually assessed your financial position and home loan suitability. They’ve offered to extend you credit, so long as you can meet the conditions of approval.

Some of the stipulations of conditional approval may be that the lender wants to see a valuation of the property you’re intending to buy. They may want to determine whether the value of the property matches the loan-to-value ratio loan-to-value ratio (LVR) and loan size they’ve said they’d be willing to lend you.

A conditional approval may also mean a lender simply wants more documentation about your liabilities and assets. They may require more payslips or an employer’s letter.

If you apply for a home loan and receive notice that you’ve only been given conditional approval, don’t panic. Odds are the lender just wants a bit more information before offering full approval. However, as with pre-approval, neither you or the lender are obligated to proceed with the loan.

Unconditional approval

Unconditional approval is the final stage of your home loan application before the loan actually reaches settlement. This means the lender has taken all your financial information into account and is willing to offer you a specific amount of money for a specific property.

Again, you are under no obligation to accept the loan at this point. However, unconditional approval is the stage at which you will be sent loan offer documents. Once you’ve signed and returned these, you have agreed to borrow a certain amount of money under certain terms and your loan will move toward settlement.

Want an expert to help you through the pre-approval process? Compare mortgage brokers below

Mortgage brokers are experts that can help you through the home loan application process. They'll compare loans for you and select the right one for your situation. One advantage of using a broker is that they generally don't charge you a fee, instead they earn a commission from the lender you choose to go with. You can compare brokers and enquire below to organise a chat with a local broker.

Rates last updated August 21st, 2018
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Aussie Home Loans
Aussie Home Loans
Aussie is one of Australia's leading financial service providers, having won The Adviser’s Top Mortgage Broker award for the last 3 years. They charge no appointment fees and can meet at a time and place which suits you.
Up to 22 lenders Enquire Now More info
Yellow Brick Road
Yellow Brick Road
Yellow Brick Road has over 40 lenders on their panel, as well as their own competitive home loans. 40+ lenders Enquire Now More info
Mortgage Choice Home Loans
Mortgage Choice Home Loans
Mortgage Choice is one of Australia's largest independent broker services. They have over 28 lenders on their panel, including the big four banks. 28+ lenders Enquire Now More info
Finsure
Finsure
Finsure has loan offers from over 35 lenders, including major brands, and will work to find a home loan that suits your property needs.
Over 35 lenders Enquire Now More info
eChoice Mortgage Brokers
eChoice Mortgage Brokers
When you do business with eChoice you will be given your own home loan manager to help you select a loan. 25 lenders Enquire Now More info

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Rates last updated August 21st, 2018
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Loan purpose
Offset account
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.64%
3.66%
$0
$0 p.a.
80%
Competitive interest rate and limited fees
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.59%
3.59%
$0
$0 p.a.
80%
Special discounted interest rate
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.65%
$0
$0 p.a.
80%
Get approved faster with a speedy online application
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.70%
3.90%
$0
$0 p.a.
70%
Requires a 30% deposit
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.49%
4.57%
$0
$395 p.a.
90%
Save on interest with a 100% offset account
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.75%
3.75%
$0
$0 p.a.
70%
This sharp rate product requires a 30% deposit
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.84%
3.84%
$0
$0 p.a.
80%
Low fee online mortgage
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
3.64%
3.68%
$0
$0 p.a.
80%
A competitive interest rate for first home buyers that keeps fees low. You will need a 20% deposit and can borrow up to 500000.

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UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

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A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

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