The words “unconditional approval” can make a first home buyer’s heart sing – it means you’re a step closer to becoming a home owner!
The home loan process moves through different stages, and as you head towards becoming a fully-fledged home owner, one of the final stages will involve a lender declaring you have unconditional approval for your home loan.
Unconditional approval comes after conditional approval. Moving to this new stage in the home loan application process means the lender has taken your financial information into account is willing to offer you a specific amount of money for a specific property.
As a home buyer, unconditional approval can be what you’re really aiming for as it cements the deal, meaning you have the green light to go ahead and buy your first home.
Let’s take a closer look at what this means, and how it impacts you as a first home buyer.
What determines unconditional approval?
Unconditional approval, also known as full approval, shows that your lender is willing to lend you a set amount of money to buy a specific home based on your circumstances.
You may already have received loan pre-approval or even conditional approval, however until you have chosen the home you want to buy, your lender cannot usually commit to offering you a home loan.
That’s because your new home will form the security for your home loan. In fact, the lender will usually hold onto the title deeds for the property until your mortgage is fully paid off.
So it makes sense that your lender wants to be sure that the value of your new home stacks up relative to the amount you have applied to borrow.
Valuations can play a key role
As part of this unconditional approval process, the lender will usually want a valuation of the property. This is not something you have to organise. Your lender will arrange the valuation, though it does explain why some lenders charge a valuation fee as part of their home loan costs.
Nonetheless, the lender’s valuation can play a critical role as it can determine how much the bank will lend against the property as well as the loan to value ratio. Don’t be surprised if the lender doesn’t tell you the value they arrived at for your home, that’s quite common. The main issue for you is that you get the green light on your loan.
If all goes well with your property valuation, the final step in unconditional approval is for the lender to take all your financial details into account, and formally offer you a home loan for a set sum.
You don’t have to accept the loan, but if you’re happy to go with the lender’s offer, all that remains is for you to read, sign and return the loan paperwork you receive from your lender. From here the process of settlement can go ahead to make your first home a reality.
Congratulations! It’s time to relax while your legal team get to work with the process of conveyancing. It’s not long now until you’re handed the keys to your own home!
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- Chapter One : Getting started
- Chapter Two : Your Dream Home
- Chapter Three : Money Matters
- Chapter Four : Ways to Purchase
- Chapter Five : Understanding Interest Rates
- Chapter Six : Understanding Home Loans
- Chapter Seven : Lending Sources
- Chapter Eight : Getting Your loan
- Chapter Nine : Choosing a Home
- Chapter Ten : Steps to Settlement