"I'm approved!" can mean several different things in the home loan world. Understanding the difference between pre-approval and unconditional approval could save you from a costly mistake, especially if you're buying at auction or ending a cooling-off period.
Pre-approval
Pre-approval (also called conditional approval or approval in principle) is a lender's indication that it's likely to lend you a certain amount, based on the information you've provided.
- Based on: your income, expenses, debts, credit check
- Not based on: a specific property
- Lasts: typically 90 days, sometimes up to six months
- Purpose: to shop with confidence and set your budget
Pre-approval isn't a guarantee. Conditions usually include a satisfactory valuation, no change in your circumstances, and final verification.
Conditional approval (after you find a property)
Once you've signed a contract, the lender assesses the specific property. You may get a conditional approval, which says the lender will lend subject to conditions like:
- A satisfactory valuation
- Final documents (e.g. updated payslips)
- Insurance on the property
- For guarantor loans, guarantor documents
Unconditional approval (formal approval)
Unconditional approval means the lender has satisfied all its conditions and is committed to lending, subject to signed loan documents and no material change before settlement.
This is the point where your finance is genuinely locked in.
Why the difference matters
Buying by private treaty
In NSW, there's a 5 business day cooling-off period by default. Your contract may also include a "subject to finance" clause. Make sure you have unconditional approval, or are confident you'll get it, before those deadlines pass.
Buying at auction
Auction contracts are unconditional, with no cooling-off and no finance clause. If your finance falls through, you could lose your deposit and face further costs.
Before bidding at auction:
- Have pre-approval
- Ask your broker whether the lender will accept that property type and location
- Consider asking for an upfront valuation, which some lenders will do before auction
Things that can derail approval
- Low valuation
- Change of job or income
- New debts
- Credit file changes
- Property issues, like defects, zoning or title problems
- Lender policy changes (for example, LVR caps on certain postcodes)
How long does each stage take?
- Pre-approval: often a few days to two weeks
- Formal approval after signing: often one to two weeks, depending on valuation and documents
Frequently asked questions
Does pre-approval mean I'll definitely get the loan?
No. It's conditional. But it's a strong indication if your circumstances don't change.
Can I get pre-approval from multiple lenders?
You can, but each application adds a credit enquiry. A broker can compare without multiple applications.
What if my pre-approval expires?
You can usually renew it with updated documents. Your borrowing power may change if rates have moved.
Want to know exactly where your approval stands? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654. We'll keep you updated at every stage.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
