We get it. Finding an affordable dream home is exciting! But that excitement can quickly sour if your lender declines your home loan application.
Unfortunately, it happens.
Sometimes, at the last minute, a borrower will discover their credit report is their undoing. Other times, it might be the inaccurate or incomplete information provided to a lender.
But there’s a pretty good fix. Many borrowers exercise caution by first submitting an application for home loan conditional approval before starting house-hunting.
Conditional approvals can be called different things by different lenders, from pre-approval, indicative approval or approval in principle but they all basically mean the same thing. Conditional approval is an indication of how much you can expect to borrow from a lender.
Conditional pproval isn't a guarantee you'll obtain a home loan but it's a great first step towards home ownership.
Three reasons to get conditional approval
Obtaining conditional approval from your lender can be beneficial in a number of ways.
- You'll get a clear indication of approximately how much money you can borrow, so you can better determine the price range you should be looking at.
- Once you identify a home you want to buy, you can make an offer with the peace of mind that you can likely borrow the amount you need.
- Your process to move to full loan approval should be smoother because you have completed a lot of the groundwork (and paperwork!) during the conditional approval process.
Keystart encourages you to always obtain conditional approval prior to house hunting so you understand the limits on what you can comfortably afford, whether you are considering buying an established house or want to build a new home.
What to consider
There are various considerations to be aware of before you engage in the conditional approval process however.
How do I organise conditional approval?
To be pre-approved for a home loan, you need to submit a loan application.
So what do lenders want from you when you submit a conditional approval application? Commonly, they require information such as evidence of employment and income, expenses, savings, assets, debts and identification.
At Keystart you can apply for pre-qualification online within five minutes. You can then go on to start an online application which may take between 20-30 minutes. Once Keystart receives your application, a dedicated home loan specialist will get in touch. We will send you an application pack and may require supporting documentation. Next, we process your application and advise if you are conditionally approved for finance.
Succeeding with conditional approval
It's possible to have your application for conditional approval declined if your application does not meet certain criteria or if a home loan is not suitable in your situation. To avoid this, there are many steps you can take.
- Check all your documentation is accurate and supplied on time.
- You may want to consider reducing your overall commitments before applying for conditional approval. Is there an extra credit card that you keep ‘just in case’? Do you have a personal loan that is just about paid off? Reducing your overall commitments, either by closing credit cards, reducing your limits or paying off debt can improve your chances when applying for a home loan and may also increase your overall borrowing capacity.
- It's important to time your conditional approval application. Since a conditional approval is typically valid for 120 days, it makes sense to apply once you’re seriously ready to start looking for a home.
With a Keystart conditional approval application; if you’re conditionally approved, you’ll receive written notification. This will outline how much you can borrow and the monthly repayments you’ll be required to make.
If you make an offer on a property, make sure it’s within the limits of your conditional approval amount and that your agreement to buy a property is subject to you obtaining the finance you’ll need to execute the transaction.
Keystart has several criteria that you need to be aware of before starting an application for conditional approval.