The Difference between Finance Pre-Approval and Unconditional Approval

When you engage Shaw & Bunner Legal to act on your behalf when buying a property, we will ask you whether you are applying for a home loan and if so where you are up to with the process?

Do you have pre-approval or unconditional approval from the lender?

Before entering into a Contract to purchase a property, a purchaser needs to know if finance is available. There is a significant difference between finance being pre-approved and finance being unconditionally approved and it is important to understand the difference.

  • Pre-approval is when a lender has indicated that they may be willing to lend you a certain amount of money subject to certain conditions. One of the conditions may be the lender’s valuation of the property. Pre-approval can give you an indication about how much you could borrow from a particular lender but is not an offer of a loan.

  • Unconditional approval indicates that a lender has taken all of your financial information as well as the valuation of the property in to account and is willing to move ahead with a home loan for a specific amount for a specific property.

When a purchaser is taking out a loan to purchase a property it is essential that finance is unconditionally approved before exchange of Contracts. If finance is not approved at the time the Contract is signed, a finance condition must be included in the Contract however noting any condition would be subject to negotiation with the vendor.

Understanding where your finance application is at enables Shaw & Bunner Legal to provide you with advice about exchange of Contracts. It also assists us communicate with the solicitor acting for the vendor and the real estate agent.

For more information about applying for a loan you should speak to a mortgage broker or lender.