As mortgage brokers it’s sometimes easy to take for granted the stress that a mortgage application can put on applicant. The differing requirements and varying policies from lender to lender can make it difficult for most people trying it on their own.
If you are planning to purchase your first home or an investment property then getting prepared early is imperative.
It can be an exciting time and nothing compares to the feeling of holding the keys to your very own property in your hand.
If you’re new to buying property, here’s how the home loan application process works.
Understand your borrowing capacity
It’s important to realise that lenders calculate your borrowing capacity differently. The variances can have significant impact on how much you can borrow. When it comes to buying a home or investment property, the first step is to get a clear picture of your borrowing power and create a budget.
How much can you afford to spend on the property? What will the repayments be and can you reasonably cover them?
Creating a budget will help you narrow down your property search and avoid overspending. Make an appointment with us for some preliminary insight into your borrowing capacity.
Choose a lender
Next, it’s time to see what loans are available and get a feel for the different lenders. The easiest way to do this is to have us compare the market for you.
We’ll get to know your financial situation and goals before recommending a suitable home loan.
Once you’ve decided on a lender, we’ll get the ball rolling with pre-approval on your finance, or at least a full pre-assessment of your position.
This is when a lender agrees, in principle, to lend you a certain amount of money. It’s also referred to as ‘approval in principle’ or ‘conditional approval’. Not all lenders provide fully pre-approved applications do it’s important to know what type of pre-approval you have.
In most cases you’ll still need full approval down the track, but getting pre-approved allows you to bid or make an offer on a property with confidence.
Gather the necessary documentation
You’ll need to supply a range of documentation to support your pre-approval application.
Requirements can differ from lender to lender, but generally speaking, they’ll typically want to check your:
- Proof of identity
- Proof of income and employment
- Credit score
- Deposit and savings history
- Assets and liabilities.
We can walk you through the paperwork and ensure nothing is missed.
Review the pre-approval offer
If the lender decides you’re a suitable applicant for a loan, they will issue you with a pre-approval letter.
Remember that pre-approvals are not a definite guarantee that you’ll get a home loan. You’ll still need to meet the conditions stipulated by the lender. Keep your broker updated with any changes in your circumstances. It’s also worth noting that pre-approvals are usually only valid for three months.
Find a property and make an offer
After pre-approval comes the fun part – house hunting. Once the right property comes along, it’s time to make an offer. We would recommend engaging a settlement agent or conveyancer at this stage too, they can assist with the legal aspects of any offer.
You’ll need to decide at this point whether to stick with the lender that gave you pre-approval or shop around for another home loan.
Complete a full mortgage application
The final step is to complete the full home loan application for unconditional approval. We will ensure that the lender product offered is competitive and still meets all your needs.
If you decide to go through the same lender that gave you pre-approval, most of the documentation will probably have already been completed. We’ll walk you through any other requirements needed.
As part of your application, your lender will likely get an independent valuation of the property. This helps them determine the risk involved in lending you the money.
If all goes well and your mortgage application is approved, the lender will send you an unconditional loan approval letter. It’s a good idea to have your solicitor or conveyancer review everything to make sure it’s in order before you sign the loan documents.
Finally, it’s time for settlement. At this point, the lender will certify that your documents are in order and advance the home loan.
Your legal and financial representatives will meet with the seller’s representatives to swap documents and lodge the transfer of title. Stamp duty is usually paid at the same time as settlement.
Then the property is all yours!
Ready to buy?
Buying can be a stressful time and getting your head around the home loan application process can be daunting. That’s where we can assist and make the process as smooth as possible.
Mortgage brokers may take the stress out of applying for a home loan. We have access to a wide range of lenders and understand which home loans might work for your specific financial circumstances and goals.