You may have just been told you’ve gained conditional approval for a home loan, or perhaps you’ve simply heard the term mentioned as part of the home buying process. Either way, you might be wondering: what does conditionally approved mean, and what does this have to do with a home loan application? Read on to learn the essentials.

What is a conditional approval?

A conditional approval is a common early step when applying for a home loan. Conditional approval means that the bank or lender is agreeing to the loan in principle, but that final approval will depend on certain criteria being met. While a conditional approval isn’t an ironclad guarantee, it does indicate you could be eligible for a home loan upon completing a formal home loan application.

Is conditional approval a good thing?

Gaining conditional approval can have a number of benefits if you’re looking to buy a property. It can demonstrate to real estate agents and sellers that you’ve taken steps towards getting finance for your purchase, that you’re serious about buying, and that you have an understanding of your borrowing power based on your circumstances. In this way, conditional approval can be seen as a positive step in a home buying journey.  Additionally, it can be helpful to have already done your due diligence so when you find your dream property you are in a good position to make an offer.

Good to know:There is no obligation with a conditional approval, meaning that neither you nor the lender are obligated to continue with the home loan. 

Is conditional approval the same as pre-approval?

You might hear different lenders or mortgage brokers use various terms, such as pre-approval or approval in principle. In Australia these terms more or less represent the same as conditionally approved, meaning a lender is willing to finance your loan as long as conditions are met.

What are some common conditions of approval?

Conditional approval means that a bank or lender is potentially willing to lend you funds, but that they’ll require further information and conditions to be met before they can formally approve your home loan. So what information might a lender require? This can vary, but could include:

  • Identification documents
  • Proof of your income, such as recent payslips and tax returns
  • Proof of your savings, such as recent bank statements
  • Documentation for any current debts, such as credit card debts or personal loans
  • A signed contract of sale, if you have already made an offer on a property
  • Documentation for a home loan guarantor, if you intend to use one
  • Additional paperwork as required

Of course, this criteria will depend on each individual’s circumstances. If you’re applying for a mortgage with Qudos Bank, we’ll provide you with clear guidance as to any documentation we’ll need to review. 

How long can it take to get conditional approval?

So you might be wondering - how long can it take for conditional approval to go through? Let’s look at the process with Qudos Bank. You can apply for a home loan with us either online, on paper or over the phone with one of our Lending Specialists, or face to face in one of our branches. Once you submit your application and all required supporting documentation, conditional approval up to a certain amount could be granted within 48 hours. This would also come with a list of criteria to be met in order for the loan to be approved.

Conditional approval doesn’t last indefinitely, but if it lapses before you finalise a property deal you can reapply for conditional approval again. You could also contact the lender to request a conditional approval extension. At Qudos Bank the conditional approval lasts for 90 days.  An extension may require you to update some or all of the information originally provided.

Can you get conditional approval from multiple lenders?

While a person can apply for conditional approval with multiple lenders at once, it’s useful to remember this could affect their credit score or ability to gain finance. This is because every time a lender runs a credit check, this can show as a loan enquiry on a person’s credit report. If there are too many loan applications, this could indicate financial difficulties. This is one reason why many people prefer to find a preferred lender or mortgage broker and keep loan applications to a minimum.

When are conditional approvals denied?

Conditional approvals can be denied if it turns out that the property is not deemed to be adequate security for the loan, or if the applicant’s financial situation has changed significantly since they gained conditional approval. This might include taking on a new debt, changing jobs or failing to meet loan conditions.

Even if unconditional approval is granted, a home loan can also be denied in the case of fraud, error or significantly changed circumstances.

If you have any questions about your financial situation or if your circumstances change following conditional approval, it’s a good idea to keep your application up to date and accurate. If you’re applying with Qudos Bank, you can speak with your Lending Specialist at any time.

What happens after being conditionally approved?

If you gain conditional approval with Qudos Bank, we then arrange a valuation of the property you’ve made an offer on to check if it will be suitable security for the loan. Often we’re able to do this digitally before we’ve given conditional approval which can substantially reduce the time it takes to gain an unconditional approval We get in touch to request any outstanding documents, and then process the full application. If your final loan application is approved – congratulations! You can look forward to the day you can move into your new property.

Qudos Bank has been helping property buyers to acquire their dream properties for decades. We’re here to help with a straightforward home loan process, and to answer any questions you might have. You can contact us on 1300 747 747 to speak with a Lending Specialist, or send us a quick enquiry below.

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Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305. The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

 Published May 2023