Conditional Loan Approval and Unconditional Loan Approval – The Difference

May 17, 2022

By Property Law Team

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This means that your loan has been assessed and approved, in principle, but the lender needs more information before it will issue a formal, or ‘unconditional’ approval, which is what you should have, when entering into an unconditional Contract for the purchase of a property.

The extra information required by a lender may include recent pay slips, a valuation of the property being bought or a fully signed and dated contract of sale.  Until certain requirements are met the lender will not issue an unconditional/formal approval

There are a whole variety of conditions a lender may impose before formally approving your home loan and all these conditions must be met, before your lender will issue a written, formal loan approval.

Unless you have a written letter from your lender stating that your loan is conditionally approved – and setting out each of the conditions you need to meet – it is safer not to start your property search and you certainly should not be committing to any purchase of property.

Unconditional/Formal Approval

The way to distinguish between a conditional and unconditional approval is by remembering that the word ‘unconditional’ means ‘there are no conditions to be met’. An unconditional home loan approval is what you want.

Once the lender has taken the time to formally assess all your paperwork, and your signed loan application, and decided to offer you a home loan based on the property you have chosen to buy, it will issue an unconditional/formal loan approval.

The lender will then issue a formal loan approval letter and once this is received then you are free to proceed with the unconditional purchase of your property without a cooling off period, or, if you have already exchanged contracts with a cooling off and a pre-approval, you can proceed towards completion.

A common trap for purchasers is to assume that they have a home loan approval in place, when in reality, no such approval has been given.  The risk here is that you could make an unconditional offer to buy a property, only to discover that you don’t have approval for a home loan.

A golden rule to remember is that a loan cannot be formally approved until your lender has examined your personal ID, plus written evidence of your income and outgoings, and of course, the amount of your deposit.


Pre-approvals and formal approvals don’t last indefinitely. Typically, there is a timeframe of three months but even then, nothing is set in stone.

A lender can still pull out prior to settlement for a number of reasons, such as fraud or error, or more likely, if it thinks that your financial situation has changed significantly since you first applied for a loan.

Important Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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