Help me with conditional/preapproval

C

CapnBloodbeard

Hoping you can help me - not sure if I'm correct, or my bank is.

I'm going with NAB for my first home loan, and I have a preapproval (after actually speaking to a lender, not just the 30 second online one).
Problem is, I need a deposit power guarantee for my deposit (it's in a FHSA, which matures July 1)
However, my understanding is that to go to auction - and also to get the deposit power guarantee - I need to have conditional approval.

From what I understand, this is a step NAB should be able to take after preapproval, which involves a credit check and verification of my income, which basically means the approval is simply subject to a property valuation.

Is that correct?

My lender is telling me that they don't do a conditional approval (though the website seems to disagree - http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/22/2/9/4), and that the deposit guarantee comes after I sign the contract, that I need to have it written into the contract that I'll make the deposit, say, within 5 days after signing. I don't believe this is how a deposit guarantee is actually approached....

If I'm going to auction, however, I don't think that's right - I need to have the deposit power cert before going to auction, which means my bank needs to give me conditional approval, not preapproval. Is this correct?

Who's wrong - me or the bank? any advice?
 
your both right.
guarantees cant be issued until unconditional approval, so the bankers right. You have a genuine concern you would like to have a loan approved prior to going to auction.

Unfortunately this is just the nature of auctions. they are risky, and the less deposit you have, the more risky thay are. In effect, unless you have the cash ready for the whole purchase price, no one can be completely risk free bidding at auction.

Id suggest finding another property whose vendor will accept either a finance clause, or give you a cooling off period in which time to organise finance/valuation and deposit bond.

In terms of the bond, another alternative is a bank guarantee, which may or may not be possible using the FHSA instead of the normal deposit account the banks take a security interest over.
 
Deposit Power require conditional approval, not unconditional.

NAB don't do bank guarantees, so I'm told, and they won't organise the deposit bond until the loan goes unconditional.

Deposit power advertise as something that people 'go to auction' with, so I find it peculiar that it's impossible to actually organise prior to auction, something's not right here....
 
Ive only been doing this a little while, Im pretty sure you need unconditonal approval. You can take a deposit guarantee certificate to the auction, but it wont be valid till you supply them with an unconditional approval.

Can you imagine the insurance company paying out for a certificate issued without unconditonal approval?
 
CapnBloodbeard said:
Problem is, I need a deposit power guarantee for my deposit (it's in a FHSA, which matures July 1)
Click to expand...

Are you able to put up some cash initially as a deposit, even if only a few grand? It seems like an awful lot of hastle and expense to go to over less than 3 weeks.

Everything is negotiable. Approach the real estate agent prior to the auction and explain the situation. Let them know you'd like to bid, you have a written pre-approval from the NAB, but the deposit isn't available for a couple of weeks. I've seen plenty of first home buyers get a house with a $500 deposit (which is less than a deposit bond is likely to cost).

Also keep in mind that as much as you may want this house, there's a good chance you won't get it as someone else could out bid you. You could just be throwing your money away on a deposit bond.
 
Yeah, I've just fired off an email to the REA requesting vendor's approval for a special condition stipulating $1000 cash deposit and a guarantee being provided in a mutually agreeable timeframe.

The deposit guarantee (apparently) can be used for other properties - and really, the money being wasted on that (should I not get the property) is nowhere near as much as the money 'wasted' on the bloody building/pest inspection. I hate auctions :p

Ok, so the information by you guys seems to coincide with my lender - just seems to contradict with the information given by websites.

BTW: Deposit Power themselves have confirmed with me they only require conditional approval.

From some google work it seems that people do come to all sorts of weird and wonderful arrangements regarding the deposit at auction, so as long as the vendor's happy to come to the party then it should be fine.
 
as a complete aside

I assume NAB was chosen because you dont need to or dont want to build in investment portfolio over time, and will likely just buy the one PPOR ?

ta
rolf
 
Rolf Latham said:
as a complete aside

I assume NAB was chosen because you dont need to or dont want to build in investment portfolio over time, and will likely just buy the one PPOR ?

ta
rolf
Click to expand...

Actually I do intend to use this as an investment property in a couple of years as I plan on moving interstate.

I actually work for NAB in another department, so for the way I want to structure the loan at the moment, the staff benefits (while not significant) seem to work fairly well for me.

Why do you ask?
 
It's because NAB is considered a high serviceability lender compared to others so they tend to be used when you are maxed out with other lenders.
 
Is that a problem though?

I get a small discount off the interest rate and I pay no LMI (I plan on borrowing more than I need to as I have more than enough deposit. It's a financial decision)
 
CapnBloodbeard said:
Is that a problem though?

I get a small discount off the interest rate and I pay no LMI (I plan on borrowing more than I need to as I have more than enough deposit. It's a financial decision)
Click to expand...

only if it becomes a problem.......which is hard to gauge without a fullfact find and goals analysis.

If you can get in with a 90% Interest only no lmi loan with offset, that would reduce a lot of the risk

ta
rolf
 
CapnBloodbeard said:
Interest only loans are something I haven't given a lot of consideration to at this point, so i'm not too clear on the angle you're going down tbh
Click to expand...

Earlier .........Actually I do intend to use this as an investment property in a couple of years as I plan on moving interstate.


Did you make that clear to the credit adviser...........or did they ask what you were going to do with the place in the future ?

Future tax considerations which have the potential to be worth (insert zeros here) compounded over time so you may benefit a lot by completing the research and acting upon it.

ta
rolf
 
Gotcha. It's not a discussion we've had so far (not that I can recall, maybe we did but not in a heap of detail), though we hadn't made a decision on how to finally structure the loan anyway. Thanks for the tip.
 
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