7 strategies for finding the perfect home within your conditional approval limits

Conditional approval home loans aren’t the same as formal, unconditional approval. In some cases, your home loan application can be denied even after you’ve received conditional approval. One of the main reasons for this rejection is that the home you’re applying for doesn’t meet the conditional approval limits.

Here are 7 strategies that could help you find the perfect home.

Pre-approval conditions

When you receive conditional approval from your lender, they’ll send you a letter detailing how much the bank is willing to lend you, how long the pre-approval is valid for and the conditions that must be met in order for them to provide you with formal, unconditional approval.

Each lender has their own conditions you need to meet before they’ll make your conditional pre-approval an unconditional offer. These limits are detailed in their pre-approval offer letter, so it pays to familiarise yourself with their stipulations so you don’t get caught out come application time.

Here are some strategies you can use to give you the best chance at transforming your conditional pre-approval to unconditional approval.

Find a home in the right price range

Finding the right home involves finding a home that fits within your budget. Know your financial limits by understanding your conditional approval details. This includes the maximum loan amount, interest rates and any other financial considerations. All of this information should be provided to you in your pre-approval letter. 

From here, it’s up to you to work out how much of a deposit you have and how much the upfront costs of buying a home will come to. With all this information on hand, you should have a good idea of what you can afford based on your pre-approval.

If you settle on a home that’s outside of your budget, chances are the bank will deny your home loan application if it falls above and beyond the amount they’re willing to lend you. 

Opt for the right type of property

From units and apartments to townhouses and standalone homes, different types of properties tend to come with different levels of risk. In some cases, the level of risk can change depending on the property market.

For instance, some banks restrict lending for units as they’re deemed higher risk than other types of properties. Other lenders might not provide loans for farms or homes on large blocks of land for the same reason. 

It’s also worth checking whether the property has standard title and zoning. Some lenders aren’t willing to grant home loans for properties with certain zones, so sometimes it pays to keep it simple and standard. 

Essentially, these types of conditions all come down to the bank's own lending criteria, so paying attention to their requirements can help you understand what they consider to be high or low risk. 

Check if it’s in a disaster-prone area

The location of the property can also make a difference as to whether or not you’re offered formal loan approval. Properties located in high risk areas, like flood plains and fire-prone areas, are often considered high risk by lenders, which can impact your likelihood of gaining finance approval.

Property valuation vs sale price

As part of the home loan application process, most lenders require a property valuation to be completed before they approve your home loan application. This can help them determine whether or not you’re paying a fair price for the property. If the sale price of the property comes in significantly higher than the valuation, chances are the bank won’t be willing to lend you that amount of money. In this case, you’ll need to come up with enough cash to cover the difference or go for a different property altogether. 

Go for urban or suburban properties

Some lenders aren’t willing to grant home loans for properties in remote areas. Sometimes, conditions state the property needs to be connected to the electricity grid, have running water and be located on a sealed road. Often large properties located in rural areas are deemed high risk, which is why banks aren’t willing to lend for them.

Good condition

It’s important to make sure that the property you’re interested in is in good nick. It should be well-maintained and free from defects. While it’s not uncommon for buyers to purchase properties to renovate, it shouldn’t be completely derelict. Completing a building and pest inspection as part of the home-buying process should help you identify potential issues that you weren’t able to spot yourself.

Not hazardous

Many lenders are wary of properties that are located close to high-voltage power lines or on contaminated land. You can often search public registers online for details on contaminated or potentially contaminated land. 

When it comes to home loans, banks and lenders tend to err on the side of caution to avoid getting caught out. Ultimately, your lender is looking for a low-risk property that would be easy to resell in the event that you’re not able to make your home loan repayments. 

Want to learn more about buying a home? Check out our collection of blogs and clips to help you navigate the home-buying process. 

You can buy a home with Unloan, or check out our borrowing power calculator. 

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

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