Conditional Approval vs Unconditional Approval

With various types of approval to navigate, it’s important to understand the difference between conditional approval and unconditional approval.

The main difference between conditional and unconditional approval is that when you receive unconditional approval your lender has approved and assessed your loan application and you are ready to purchase your property, whereas conditional approval required you to still need go through an assessment and ensure certain conditions are meet to receive your home loan.

Conditional approval means that your loan has been assessed and approved – in principle at least – though the lender needs more information before you can be granted formal, or ‘unconditional’ approval, which is the end game that home buyers work towards.

The extra information a lender may require with conditional approval can include recent pay slips, a valuation of the property you’re buying or a fully signed and dated contract of sale.

However, there is a whole variety of conditions a bank may impose before formally approving your home loan. As a guide, some lenders won’t even consider your home loan application until you’ve found the property you want to buy.

Of course, bank’s want your business. But a phone call from your lender saying that your loan is approved is not a cue to pop the champagne corks. You simply can’t afford to rely on this.

Unless you have a written letter from your lender stating that your loan is conditionally approved – and setting out each of the conditions you need to meet – you cannot assume that your home loan is almost ready to go.

The way to distinguish between conditional and unconditional approval is by remembering that the word ‘unconditional’ means ‘no strings attached’. So unconditional home loan approval is what you’re looking for.

Unconditional approval means that a lender has taken the time to formally assess all your paperwork, and your signed loan application, and decided to offer you a home loan based on the property you have chosen to buy.

Without any further conditions left to satisfy, your lender will send a formal letter stating that you have unconditional loan approval. And that’s when it’s time to celebrate.