Conditional pre-approval
Conditional pre-approval, sometimes called pre-approval, is an early indication from a lender that you're likely to be approved for a loan up to a certain amount, based on the income, expense and credit information you've provided. It's usually issued without a specific property attached, and it's subject to conditions including verification of your documents and, later, satisfactory valuation of the property you choose. Pre-approval typically lasts around three to six months, though this varies by lender, and it's worth checking the expiry date before you rely on it. Having pre-approval can help when making offers on property, since it shows a seller or agent you've done preliminary groundwork, though it isn't a guarantee of final approval, and circumstances such as a change in your income or credit file can affect the outcome later.
Formal assessment
Once you've found a property and signed a contract, the lender moves to a formal assessment, sometimes called full or unconditional assessment. This is where the lender verifies your supplied documents in detail, including payslips, bank statements and identification, and usually orders a valuation of the specific property to confirm it supports the loan amount. The lender also reassesses your ability to service the loan, factoring in your income, existing debts, living expenses and the interest rate buffer required under responsible lending obligations. This stage is generally more thorough than pre-approval, since real numbers and a specific property are now involved. Delays at this point often relate to outstanding documents, valuation scheduling, or complex income such as self-employment, so responding to lender requests quickly usually helps keep things moving.
Unconditional approval
Unconditional approval, also called formal or final approval, is issued once the lender has completed its checks on your finances and the property and is satisfied everything meets its criteria. At this point the lender typically issues loan documents, including the loan contract and mortgage documents, for you to review and sign. It's worth reading these carefully, checking the interest rate, fees, repayment amount and any special conditions, and asking questions before signing if anything is unclear. Unconditional approval is a significant milestone because it removes most of the uncertainty in the process, though settlement still needs to be organised and finalised. Some contracts include a finance clause with a deadline, so it's generally important that unconditional approval is obtained before that date to protect your position under the contract.
Settlement preparation
After signing loan documents, your lender and your conveyancer or solicitor coordinate to prepare for settlement, the point at which ownership of the property transfers and the loan funds are used to complete the purchase. This usually involves final checks such as confirming the loan amount required, preparing a settlement statement showing adjustments for rates and other outgoings, and arranging for the lender's representative to attend or process settlement electronically through platforms such as PEXA. Around this time it's common to do a pre-settlement inspection of the property, checking it matches the condition agreed in the contract. Any outstanding conditions from unconditional approval, such as proof of building insurance, are usually required to be satisfied before settlement can proceed.
Settlement and after
On settlement day, the lender releases funds according to the settlement statement, the property title transfers to you, and you typically receive keys shortly afterwards. Your conveyancer or solicitor and the lender handle most of the administrative steps, including registering the mortgage. After settlement, your first repayment is usually due within a few weeks, and it's worth confirming the exact date and amount with your lender. It's also a good time to set up any offset account or redraw facility linked to the loan, and to check that direct debits and account access are working correctly. Keeping copies of your loan contract and settlement statement is useful for future reference, including for tax or refinancing purposes.
Key points
- Pre-approval indicates likely borrowing capacity but isn't a guarantee
- Formal assessment verifies your documents and the specific property
- Unconditional approval means the lender has finished its checks
- Settlement transfers ownership and releases the loan funds
- Meeting finance clause deadlines in the contract protects your position
Frequently asked questions
How long does home loan approval take?
Pre-approval can often be obtained within a few days, while formal unconditional approval usually takes one to three weeks after a signed contract and valuation, though timeframes vary by lender and complexity.
Is pre-approval the same as final approval?
No. Pre-approval is a preliminary indication based on your circumstances, while final or unconditional approval follows a full assessment of your documents and the specific property.
Can a loan be declined after pre-approval?
Yes. Pre-approval is conditional, so a change in your income, credit file, or an unfavourable valuation can affect the final outcome.
What can delay approval?
Common delays include missing documents, complex or self-employed income, valuation scheduling, and unclear information on bank statements.
Do I need a solicitor or conveyancer?
Yes, generally. A conveyancer or solicitor manages the legal transfer of the property and works with your lender to coordinate settlement.