The Ins and Outs of Conditional Approval
There are plenty of people out there that dive in at the deep end, find a property that they’d like to buy without any consideration for their financial potential and then end up getting rejected for a mortgage.
And then there are those that prefer to do things a little more intuitively; by applying for what most inside experts refer to as conditional approval.
With it, you’ll have a much clearer idea of what you can borrow from a lender – or more importantly, how much you can afford to repay.
And without it, you could be going into the property purchasing process near-blind. Sure, a mortgage calculator can give you an idea of your borrowing potential; especially if you take advantage of their features to get a rough idea of your financial capabilities, but there’s nothing quite as reassuring as knowing that once you’re ready to buy, your lender is 1 step closer to full approval.
Is it a guarantee?
The clue is in the name really. Conditional approval is technically approval; as long as your lender’s conditions are met. Provided the conditions are met, it is like being given the go ahead to borrow a certain amount of money, without any signatures on the dotted line.
Generally speaking, an approval with conditions will work by allowing you to get a nod from your chosen lender that, according to their investigation and preliminary checks, you should be able to borrow a certain amount up to a point.
And although not a guarantee, once you know what a bank will likely be able to lend to you – you’ll simply need to find a property within that budget and go from there.
How can you receive a conditional approval agreement?
The first step is to speak with a broker from Tundra. There’s an initial application process whereby you will usually be asked to fill out a loan application describing your income, assets, debts, and expenses
We will then formulate a preliminary assessment that will help you to determine the right lender. Once determined, you will need to properly formalise your financial data and paperwork ready for your broker to apply for a conditional approval. Once submitted, the lender will then evaluate your information to A) gauge that you’re an eligible borrower based on your credit history and B) determine the amount that they feel you can borrow.
There are two things to consider right about now,
First, there’s the fact that any offer of conditional approval that a lender issues to you will have a time restraint. 90 days is fairly standard for most lenders so be sure to get the ball rolling with your property search as soon as you receive the go ahead.
Second, there’s the need for you to properly formalise your financial data and paperwork ready for your lender to take your mortgage application further when the time arises.
Why might you want to apply for a conditional approval rather than just apply for a full approval?
If you’re just trying to see what you could afford, so as you can start looking for houses; a conditional option can save you time and stress.
There’s also the fact that if you do receive full approval, even if it is conditional and subject to further checks, you might find yourself feeling a lot happier about actually considering putting offers on the table for homes that you may like.
You’ll also get to enjoy a closer look at what you can afford to borrow from your lender – and an idea of your budget based on your financial data.
How far will conditional approval take you?
You could go all the way to making an offer on the property you want to buy, just off of the back of this type of preliminary approval.
As your lender will have likely evaluated your finances initially, the likelihood of them saying yes when it comes to buying a property will be a lot more prominent. You could bid on a home of interest and then take your application to the next level by letting your bank know that you’re ready to go ahead.
How’s best to move your application forward?
If you’re looking for conditional approval, then speak to our team. You will likely need to provide evidence to your lender to allow them to evaluate several factors.
They will want to know how much you make each year – or on a monthly basis, instead. They’ll use this information to work out how much you can afford to repay. They’ll also want to calculate your living expenses including bills, utilities and even gym memberships. They will also want to know about what assets you have such as savings, a car and superannuation. Finally, they’ll evaluate any of your pre-existing debts.
If you’ve decided that now’s the time to buy a home, but you don’t want to go through the mortgage application until you’re 100% that the right time is now, then a conditional go ahead can be a huge advantage to have. Sellers will take you seriously, lenders will know that you mean business and if you’re ready to proceed – you can simply upgrade your request and get the full approval underway.
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Disclaimer -This page/article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.