How the Home Loan application process works
So you’re planning a property purchase - maybe even your first (yay!) - but you’re unsure how the loan application works? Then relax! Here’s your step-by-step guide to getting a home loan that suits your specific situation and goals.
Understand your borrowing power
When it comes to buying a home or investment property, the first step is to get a clear picture of your borrowing power and budget.
How much can you afford to spend on the property? What repayments will you be able to reasonably cover?
Having a budget in mind will help you narrow down your property search and avoid overspending. HoLo has heaps of calculators, tools and advice to give you some insight into your borrowing capacity, so head over to your dashboard (or register if you haven’t already - it’s simple and it’s free). You can even schedule a chat with an expert for a time that suits you.
Choose a lender
Next, it’s time to see what loans are available and get a feel for the different lenders. The simplest way to do this is to have a broker like HoLo compare the market for you (though you can do this on your dashboard too).
A good broker will get to know your financial situation and goals before recommending a suitable home loan, which saves you time considering home loans that may not be right for you, even though you’re not aware of it.
Get pre-approved
This one’s important - and it always surprises us how few potential borrowers are aware of this step. Once you’ve decided on a lender, your broker will get the ball rolling with pre-approval on your finance.
Pre-approval 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’.
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. At HoLo, this is always a major milestone for our clients, as it means they are one step closer to their ultimate goal.
Firstly, gather the necessary documentation
First-up, 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
Expenses
Assets and liabilities.
This is something HoLo clients feel confident about as they are guided through the paperwork to ensure nothing is missed.
Review the pre-approval offer
If the lender decides you’re a suitable candidate 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.
Pre-approval shouldn’t cost anything. There’s also no obligation to take out a full home loan with that lender and they are typically valid for 3 months/90 days.
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. If the search has already started, that’s ok; now it can get serious since you know where you stand and what you can afford. See? Told you pre-approval is important.
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.
If you decide to go through the same lender that gave you pre-approval, most of the documentation will probably have already been completed. HoLo can walk you through any other requirements as 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.
Settlement
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.
At this point… congratulations! The property is all yours.
Ready to buy?
Getting your head around the home loan application process can be daunting. That’s where HoLo can help.
Mortgage brokers take the hassle out of applying for a home loan. HoLo has access to a wide range of lenders and understands which home loans may work for your specific financial circumstances and goals.
Let’s chat about your property purchasing plans.
If you’d like to know more, book an appointment or contact us.
Tags: