There are some key conditions that a home buyer can select when an offer for a property first goes in. These include: Subject to finance and subject to building/inspection. There are special conditions available too, including for those who are buying a home that is currently rented. When putting in an offer on a home, look at your options (usually checkboxes) and make sure you fill in the ones relevant to your purchase. You can ask your conveyancer for advice, or speak to the real estate agent about what the considerations are and how they work.

Buying a property can feel overwhelming, especially for first-home buyers who won’t have come across the paperwork or processes before. Just knowing what the terms and conditions mean and how they are part of your buying right gives you a great head-start for taking control of your property purchase.

In this blog we’ll be looking at how important the Subject To Finance condition is and why you need to read your property contract carefully.

When to start your financial work for a home purchase

You need to start working on your finances the minute you decide that you’d like to buy property, even if that's three years away.

This will give your time to prepare your personal budget and monitor your income and outgoing expenses to decide how much you can comfortably set aside for your deposit and loan repayments. It’s also a great way to decide what you don’t really need in your spending and start to make room for your mortgage repayments, fees and interest.

Just before or as soon as you start looking for properties it’s time to approach banks, lenders and mortgage brokers to assess what different home loans are available and which are best suited to your needs.

Banks and lenders offer different services, fees and terms so it’s important to hunt around and find a good match for your income and overall loan expectations.

Your lender will be the one locking in your place for any first-home buyer guarantees and other exemptions you might be eligible for. These can be limited so early applications allow them to save you a spot. Make sure to be clear when you are talking to them about what you need and what your buying circumstances are.

What if I don’t have loan approval in time?

Applying for a home loan is a long and complex process. As well as having to complete identification, financial records and decide the loan type you want, you also need to wait it out while the lender provides approval.

It’s very possible that you will find a property you love before your loan application has been formally lodged or finalised. If so, you can safely put in a condition that your offer is subject to financial approval in your offer either in writing or with the online buyer’s application (i.e. for Openn Negotiations). 

You will also be asked how many days you need for approval to take place. It’s important that you have an idea of the timeframe from your lender or mortgage broker so this can be accurate.

Ideally, if you haven't already started you will begin the application the moment you put your offer in on a home. This gets the lengthy process underway and cements your commitment to the purchase. 

While you might not get your approval back before the offer goes through, you will at least have started the process to help reduce your wait time before settlement. In many cases, the lender can transition your pre-approval application over to a formal loan application if the vendor accepts your offer before a bank comes through with pre-approval.

The financial paperwork for your home purchase, selecting your lender and signing lending terms can’t be rushed. Give yourself as much time as you can.

Make sure you have time in the days ahead to retrieve everything your lender needs from you. You also want to make sure you read over the terms of their borrowing contract carefully and assess the fees and charges that are part of the loan as well as those for special conditions, like paying off your loan earlier than agreed, remortgaging fees as well as what the fees are if you sell your home and pay it in full earlier than the agreed mortgage timeframes.

Do I need pre-approved finance for my property purchase?

Pre-approval on your home loan is not essential but it is highly recommended for a number of reasons.

• You know where you stand with your property budget
• You can find the right lender
• You start the paperwork early so you are organised and prepared
• Your buyer application is more appealing to vendors
• It reduces the risk of problems and delays
• Allows you to bid with confidence at auction

What is essential to have is a condition on your contract that says the purchase is subject to approval.

Even if you have your loan pre-approved it’s still worthwhile to leave in the Subject To Approval condition on your sale contract. It gives you more freedom if something goes wrong. This is a really big one with inflation and ongoing interest rate hikes. If your loan was preapproved two months ago, it may no longer be considered by a bank if interest rates have pushed the upper prices of your original estimation outside your budget.

It can be a nasty surprise for a buyer who feels confident in putting in an offer only to find the property is now outside of their budget.

To be safe, it’s always best to set your purchase limit under the maximum loan approval figure, giving you some leeway for a rise in interest both before and after you buy.

Pushing to the very limits of your price range can mean you place financial strain on your income. Leave some room for interest rate hikes as well as savings in your account so that you can afford upfront costs and moving-in essentials.

You will need to specify the subject-to-approval condition with the real estate agent before the contract is final. Also, be sure to read the contract carefully to make sure the correct approval has been carried over into your purchase contract. If it has been left out, speak up. No matter how hard a real estate agent pushes, you have the right to leave the condition in. 

A great real estate agent will honour your wishes, but some may try to convince you that you need to sign before someone else sweeps in with a better offer and you lose out.

Getting your pre-finance conditions wrong can mean that you lose your deposit as well as the property you were moments away from buying. Losing a sum as hefty as a deposit can set you back years in your dream of owning a property.

Who can help with my property paperwork?

Your conveyancer is the best person to talk to about the terms and conditions you need to be safe when signing a property contract. They are trained to know and understand the legal terms and the impact of having something added or omitted from a property contract.

Never feel pressured to act faster than you are ready.

You have the right to get legal advice and protection in your contract. Don’t budge until you know what you are signing and feel confident it’s the right fit for your circumstances.

Hire your conveyancer before you sign a property contract. Once you sign, it’s locked in and there is no room for further negotiations or changes.

Give your conveyancer time to look over the details. A great conveyancing service will be able to give you a rundown on what you are signing as well as provide recommendations that will make the contract fairer.

Never assume a contract is normal or listen to someone who tells you, “That's how it’s done.” There are conditions that can protect you and remove many of the risks associated with buying property. Knowing what they are is important as they work as a safety net in the first few weeks after you sign a contract to back out and keep your deposit if anything goes wrong.

Want the best conveyancer in Albury to look over your contracts before you sign them? Book a complimentary 15-minute chat to see if we can help walk you home.