The home loan process moves through different stages, and one moment to be celebrated is the news that you have been given unconditional approval for your home loan. But what exactly does it mean?
In the loan application process, you may receive “conditional” approval at an early stage. This typically means the lender has approved your loan in principle but is waiting on a bit more information, often a valuation of the home you’re planning, before making a final decision.
The next step is receiving unconditional approval. It’s an exciting stage because it means your lender has taken all of your details into account, and is happy to lend you a set amount of money to buy a specific property.
It’s that exciting moment when you get the green light to go ahead and buy your first home.
What is formal approval?
Formal approval is just another name for unconditional approval. You may even see it described as full approval. It means the bank has everything it needs to make a final decision, and they have confirmed they’re willing to lend you the money.
At this stage, you don’t have to accept the loan, however if you’re happy to go with the lender’s offer, all that remains is for you to read and sign the loan paperwork. Your Aussie Broker can explain anything you don’t understand or you’re not sure about in the loan documents.
Receiving approval from the mortgage insurer
If you borrow more than 80% of your home’s value, your lender may ask you to pay lenders mortgage insurance (LMI). It’s a type of insurance that protects the lender (not you) if you can’t keep up the loan repayments.
Your lender will arrange LMI on your behalf but it does mean that your loan application will also need to be approved by the LMI insurer. That’s because the insurer is effectively wearing the lender’s risk.
There is no guarantee you will be approved by the LMI insurer, but some of the factors the insurer will consider include your credit record, your savings history and the stability of your employment.
With your loan approval – and LMI – all stitched up, it won’t be long 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