What is conditional approval and unconditional approval?

Obtaining a loan for a property purchase, refinance or change to an existing loan can be a daunting process when there are so many buzz words thrown around by those in the industry. We explain key milestones in this article.

The goal is to have the lender completely satisfied so they will issue you with a formal “loan contract” that details terms and conditions of the loan. There are usually associated forms issued at the same time to setup repayments and transactions accounts.

Loan application: Asking a lender to provide you with your finance starts when you submit an application to them. The lender reviews the application form, and “supporting documents” such as payslips, your credit history and property, then gives a decision.

Conditional Approval (Also called Indicative Approval, or Approval Subject To): Your loan application has merit but the lender is not completely satisfied. There could be multiple reasons including, clarification about information on the application form, a need for further supporting documents, queries about your credit history, or the need to value a property. The lender will put the application aside and await a response before taking any further action.

Unconditional Approval (also called Formal Approval):  The lender has decided there are no unresolved issues.  In other words, the application form, supporting documents, your credit history and the property all satisfy their lending policy.  Your loan contract is issued at this point, usually in less than 48 hours.  All you need do is obtain the loan contract documents, then correctly complete and return them.

Settlement:  Your lender and any other parties will schedule a meeting to complete your purchase or refinance.  The meeting is generally referred to as "settlement".  This is the process of creating your loan account(s) and distributing the loan funds as required.

If you would like any further information or clarification ot to make an appointment, call Mortgage Choice in Mentone today on 03 9585 2000.

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