How To Get A Home Loan

Have you placed a deposit on a property? In order to protect yourself from potentially losing your deposit, it is important to first consider the loan approval process before paying the deposit.

Many first home buyers or even investors do not completely understand the entire process of buying property. One common issue I come across is buyers who are not aware of the consequences of failing to obtain an unconditional loan approval from their lender before exchanging or before the cooling-off period expires .

The first question you should ask yourself is “have I thought about my loan position before leaping into one of the biggest purchases of my life?

Now that you have asked yourself this question and you are now looking to obtain finance for the purchase of your next property, you need to understand the following 3 stages of the loan approval process:

  1. Pre-approval.
  2. Conditional pre-approval.
  3. Unconditional loan approval.

What is Pre-approval?

Pre-approval should generally be obtained from the lender before you venture out and start shopping for your next property. This provides you with a basic estimate of the amount you may be able to borrow from a lender based on your current income, assets, investments and other particulars.  Remember, the pre-approval is only an estimate and does not bind the lender to loan you the amount.

Is Conditional Pre-approval enough?

Once you have located your property and have a rough idea about how much you need to spend, the lender may grant you conditional pre-approval. This basically means your loan is approved subject to the lender’s conditions being satisfied.

Although conditional pre-approval is not binding, it is an indication that the lender is willing to loan you the money and it is generally unlikely that your loan will be rejected.

Do I have Unconditional Loan Approval?

To ensure that you are in a position to know whether you should proceed with the purchase of a property, it is common practice to obtain written unconditional loan approval within the cooling-off period. This provides a clear indication that the lender is willing to lend you a specific amount for the purchase.

If you do not have a cooling-off period, you may wish to obtain written unconditional loan approval before signing on the dotted lines.

Bear in mind that some lenders have a set period of time before an unconditional loan is granted. Depending on the lender, the process can take about 1 to 3 weeks. The lender is also known as the incoming mortgagee.

You should constantly follow up your lender to work towards getting your loan unconditionally approved.  Remember, the squeaky wheel gets the oil!

Why is this important?

It is unfortunate and maybe a rush of blood, but some buyers may decide to proceed without unconditional loan approval and if the lender decides to not provide you with the loan, then you may lose your deposit if you cannot proceed with the purchase.

If you have any concerns or you are confused about the loan approval process, a broker can help you with the steps associated with obtaining unconditional loan approval.

If you do not know any brokers or need further information, please feel free to contact Unified Lawyers on 1300 667 461.

DISCLAIMER: The content of this publication does not constitute legal advice and is intended only to provide a summary and general overview  We do not guarantee that it is current.  You should seek specialist legal advice or other professional advice about your specific circumstances.    

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