The three types of home loan approval: explained

June 10, 2022

Buying a property is one of the biggest purchases you'll likely ever make. In most cases, you’ll need some kind of home loan to fund your purchase. That means you need to understand the types of home loan approval that exist and which one is right for you.

When you’re in the early stages of your property search, it’s helpful to have a rough idea of how much lenders are willing to lend you. However, when you’re making an offer on a specific property, it’s important to have a clearer indication of what loan amount you’ve qualified for.

Securing the right home loan approval type is what will give you the confidence to act fast, jump on the best opportunities and secure your dream property. 

So, let’s run you through the three key types of home loan approval you need to know about and the fastest way to secure loan approval as a homeowner. 

What is pre-approval?

If you’re at the start of your property search, you’re probably still assessing which postcodes and property types are within your budget. But rather than stabbing in the dark or guessing how much you can spend, it can be worth securing pre-approval from a lender. 

In a nutshell, pre-approval is the first step in the home loan approval journey. It gives borrowers (like you) an estimate of what loan amount you’ll likely be able to borrow. 

While pre-approval only gives you an indication of the amount you’ll be approved for, it does offer plenty of benefits for buyers, including:

  • It can help you narrow down your property search: with a rough estimate of your loan amount, you can refine your search to only properties that are actually within your budget. This means less time spent at open homes and more time focusing on the right properties within your reach.

  • It allows you to make compelling offers on the best opportunities: if you stumble on a property that ticks your boxes, you can act fast and make an offer quickly with pre-approval under your belt. This can put you ahead of other buyers, especially in hot or competitive markets.

  • It’s a helpful stepping stone toward a formal home loan offer: by securing pre-approval, you’re setting yourself up for a quicker, easier journey to formal approval (as your lender already has your details on file to speed up the approval process).

At Bridgit, we offer bridging loan pre-approval for homeowners who are still searching for their next home and don’t have a contract for sale yet. Our simple, online application process is completely free and there’s no obligation to continue with formal loan approval either. 

What is conditional approval?

The next stage of home loan approval involves getting more detailed information about the property you want to purchase. Conditional approval allows you to secure approval for a specific property and loan amount.

Typically, the lender will give you conditional approval for a loan amount and will require you to provide some extra information in order to proceed to an unconditional offer. 

Some of the conditions lenders might add to your loan approval include:

  • They require recent pay slips to prove your sources of income and capacity to pay for the loan amount.

  • They will need to conduct a property valuation to formally assess how much your current property is worth and how much equity you can access.

  • They may need a signed contract of sale to understand exactly what property you’re planning to purchase.

At Bridgit, we’ll arrange property valuations for homeowners who are applying for a bridging loan with us. This allows us to understand what your current home is worth and set an accurate loan amount. 

Plus, we require all applicants to provide a signed contract of sale in order for us to offer conditional approval for a Bridgit bridging loan. 

What is unconditional approval?

The final step in the home loan approval journey is this: unconditional approval. 

As the name suggests, unconditional approval means your lender has given you the tick of approval for a loan with no strings attached. 

To secure this type of loan approval, you’ll need to get your lender to formally approve all of your paperwork, provide details about the specific property you’re buying and upload any additional supporting documents.

This type of home loan approval is especially important to secure if you’re planning to purchase at an auction (as there is no cooling off period, which means you need to know you have your finance sorted before bidding at an auction). 

What is the fastest way to secure home loan approval? 

At Bridgit, we offer loan approval to homeowners in as little as a couple of hours, thanks to our online application process. We help buyers secure the bridging loan they need to buy their dream home, without waiting for traditional banks to manually process their application. 

As a non-bank lender, we’ve designed our own application from scratch to make it easier for buyers to secure speedy, same-day approval (minus the hassle of physical paperwork). 

Whether you’re tired of waiting for bank approval that is taking too long or you’ve found your dream property, we can get you moving with our 5-minute application process. 

Ready to see how easy it is to apply for a home loan with a non-bank lender? Apply for a Bridgit bridging loan today. 

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