The home loan approval process can seem extremely daunting and overwhelming – especially because a home loan is the biggest financial commitment a person will make in a single transaction.
It’s certainly no small feat!
So, to make this process easier, we’ve put together this process flowchart to guide you along your home loan application process.
1. Chat to a Mortgage Broker About the Home Loan Process
Before even starting the home loan process, you should consider engaging the services of a mortgage broker.
Employing the help of a professional is the most beneficial decision you can make.
Mortgage brokers are up to date with current trends and market conditions, have access to various lenders and are experts in negotiating the best arrangement to suit your personal needs and financial situation.
What’s more, banks and other lenders are typically highly specific about the paperwork and documents submitted. More often than not, homebuyers try to tackle the application independently and get turned away because of a flaw in their application.
This delay can set you back weeks.
The benefit of having a mortgage broker in your corner is that they’ll help you through the process by providing guidance on home loan products, and they’ll complete and submit the application on your behalf.
So, you can expect your mortgage broker to help you determine:
- how much you could potentially borrow,
- how much deposit you’ll need to avoid lenders mortgage insurance,
- what your upfront fees are likely to be (such as stamp duty and legal fees), and
- which home loan products are best suited to your circumstances.
Once the specifics are established, it is time to prepare for your application.
2. Prepare for Your Home Loan Application Process
Many people’s home loans get rejected because they are too hasty and don’t prepare adequately.
Here are a few factors you should consider while preparing your home loan application:
- to meet the lending criteria, you should build up a good credit rating by paying your debts on time and closing unnecessary credit cards;
- set up a budget and try to save as much money as possible to help cover the costs of the deposit and other (sometimes unexpected) fees and charge;
- establish how you want your finances to look going forward so that your mortgage broker can identify the type of home loan (and features) that will be best suited to your financial objectives;
- gather all the necessary loan documents you’ll need to submit the application; and
- start looking for a home based on the preliminary assessment of your borrowing power.
3. Apply For Conditional Approval or Pre-Approval
Once your mortgage broker has advised you on the different home loan option and you’ve reached an agreement, the application process begins.
You’ll need to supply the following loan documentation:
- proof of income and employment such as recent payslips or tax returns,
- recent bank statements,
- proof of assets such as cars or investment property,
- proof of liabilities such as current debts, and
- identification documents.
Usually, lenders give you conditional approval if you haven’t satisfied all the requirements for final approval, such as finding a property.
So, approval is conditional on you completing those last requirements.
4. Find Your Dream Home
The home loan pre-approval phase is valid for anywhere between 3-6 months, depending on the lender.
You should use this time to start looking for the property you want to buy.
It’s worth noting that homebuyers who already have pre-approval are attractive candidates to the sellers because they can provide a sense of security.
Once you have a house in mind and have entered into a contract of sale with the seller, your mortgage broker will order a property valuation to compare the property’s market value to the loan value.
If you’re borrowing over 80% of the property value, you may need Lenders Mortgage Insurance approval at this stage as well before you can get final approval.
5. Receive Unconditional Approval and Pay Your Deposit
Once you’ve satisfied the lender’s conditional guidelines, your home loan will most likely be formally approved.
The lender will issue a formal approval letter indicating that they’re happy to proceed to the settlement stage.
Once you have received your formal approval, you can get in touch with your lender and arrange to sign the home loan contract!
In the meantime, the unconditional approval letter can be used to secure your property, and you can arrange with the seller of your new home for you to pay the deposit.
Once the lender has confirmed that all of the documents you’ve signed are in order, they can then transfer the loan funds so that you can pay the seller.
In most cases, they’ll contact your solicitor or conveyancer and advise them that the funds are available and that they can book a settlement time and date with the lender.
The settlement stage makes the home loan approval process all worth it.
Your contract to purchase would have provided you with a settlement date.
The settlement process includes:
- having the seller’s conveyancer or solicitor prepare and register the transferring of the property’s ownership,
- transferring outstanding monies to the seller, and
- collecting your keys.
It’s important to make sure that you have enough money in the account that the settlement will be extracted from. Keep in mind that you might’ve used money from this account for stamp duty and other fees and charges, so it might have decreased to below your settlement amount.
Your mortgage broker will touch base with you after settlement to make sure that you understand how your mortgage repayments work and review your home loan features, such as an offset account or redraw facility.
Once you are satisfied, it’s time for congratulations – your home loan process is finally complete!
How The Mortgage Agency Can Help You
The home loan process can be quite a long one. But, doing it properly means you will be able to reap the rewards.
Mortgage brokers can play an important part in the process by advising you on preparing your credit rating and making yourself an attractive borrower to lenders. They’ll also help you apply for the loan and can provide guidance right up until the settlement money is transferred and you pick up the keys.
At The Mortgage Agency, the road doesn’t end there. Not only will our expert brokers guide you through the home loan process step by step, but they will also continue to provide support afterwards should you have any questions or even want to refinance or buy an investment property or holiday home one day in the future.
If you would like to see how our expert team of mortgage brokers can assist you in the home loan approval process, get in touch today.
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.