Understanding loan approval conditions
Getting a conditional approval or formal approval is a significant step — but it is important to understand what the conditions mean and what needs to happen before settlement.
The stages of loan assessment
1. Pre-approval (conditional)
An early indication of how much a lender may lend you, based on the information provided. Not a guarantee. Subject to full assessment, valuation and verification.
2. Conditional approval (credit approved)
The lender has assessed your financial position and approved the credit — subject to specific conditions being met, such as property valuation, final document verification or sale of an existing property.
3. Unconditional / formal approval
All conditions have been satisfied. The lender is ready to proceed to settlement. This is the stage where you can safely proceed to exchange or settlement.
4. Settlement
The lender releases funds, title is transferred and the loan commences. Repayments begin from this date.
Common approval conditions
Satisfactory property valuation at or above the purchase price
Provision of final payslips or updated bank statements
Evidence of genuine savings if required by the lender
Sale of an existing property (for bridging scenarios)
Building and pest inspection report (where required by the lender)
Confirmation of home and contents or landlord insurance
Updated ID verification or AML (anti-money laundering) documentation
What to do after receiving conditional approval
Read all conditions carefully — some have time limits
Do not take on new debt or change employment during this period
Do not make large unexplained deposits into accounts lenders are monitoring
Organise building and pest inspections promptly
Engage a solicitor or conveyancer to review the contract if not already done
Keep your broker or lending contact updated if anything changes
What can cause an approval to lapse or be declined after conditional approval?
Property valuation comes in below the purchase price
Change in employment or income between conditional and formal approval
New debts discovered during final verification (undisclosed at application)
Significant change in bank account balances that cannot be explained
The property fails building or pest inspection and the lender requires conditions
The conditional approval expired before all conditions were satisfied
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General information only
This article is for general information purposes only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute credit advice, financial advice or a recommendation. You should consider whether this information is appropriate for your circumstances and obtain independent advice where necessary. K&M Solutions and Services Pty Ltd (ACN 649 305 126) does not hold an Australian Credit Licence.
This article is for general information purposes only and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute credit advice, financial advice or a recommendation. You should consider whether this information is appropriate for your circumstances and obtain independent advice where necessary. K&M Solutions and Services Pty Ltd (ACN 649 305 126) does not hold an Australian Credit Licence.