Surprise! Imagine being 10 days away from settlement and after a 3 month bank approval process, your bank says the “D” word – Declined!
Last week we witnessed another backflip decision from a lender, changing their minds after the client had received a “Conditional Approval”. The lender declined the application due to their income requirements changing, and the client is now exposed and not able to settle on time.
With credit policies continuously tightening, we strongly advise to hold out for an unconditional approval before committing to a purchase.
Types of Bank Approvals:
• Pre-Approval – An indication that the bank may approve, based on income information. Indicative only and it gives you an idea of what is possible.
• Conditional Approval – An assessment of all the facts and figures, and conditional to a valuation and final risk assessment.
• Unconditional Approval – a lender has looked at income, valuations, and all aspects of the loan application, and now fully commits to producing loan documents and providing funds for your purchase.
We find real estate agents are increasingly placing pressure on buyers to hurry their decision and exchange contracts. To allow for bank delays, we suggest negotiating a 3 to 4 week “finance clause“ to allow for Unconditional Approval and full lender commitment before you are legally liable to settle.
To find out more about finance clauses and avoid lender surprises, email us or call 02 9449 2333 to talk to one of our property specialists.
