Apply For A Home Loan
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Applying for a home loan – particularly if it’s your first – can seem a daunting prospect. A little research about how to successfully apply for your mortgage can reap huge rewards if it helps your loan application sail through to acceptance.
Find out all you’ll need to know about the loan application process, including the documentation your lender will need to see before your loan application can be approved. Read about the keys to securing approval here.
What steps do I need to take before I apply for a home loan?
The basic steps you should take before applying for a home loan are:
- Determine what sort of loan you need
- Work out your borrowing power and how much you may be able to afford
- Gather together all the documentation you’ll need to prove your identity, your income, your assets and your debts
The sort of loan you’ll need depends on why you’re applying for a loan in the first place.
- Most first home buyers opt for conventional principal and interest loans offered by lenders who can accommodate low deposits. Some lenders offer specific introductory loan packages for first-time buyers. These loans often have lower interest rates at the start of the loan and reduced or zero fees to help you get on your feet when first buying a home. However, they can sometimes come with high revert rates, meaning the interest after your introductory period ends is higher than the standard home loan rate.
- If you’re buying land and planning to build your own home, look at construction loans, also called owner-builder loans. These loans allow you to pay your home builder in stages as building construction is completed and you only pay interest on the amount used for construction.
- If you’re refinancing either to consolidate debt or after significant change in your life, you can think about standard variable rate loans or a line of credit loan to access equity built up in your home.
- If you’re self-employed or a contractor and can’t provide the documentation required for a standard loan, you’ll be able to look at ‘non-conforming’ or ‘low doc’
- Property investors might consider interest-only investment loans, which are typically offered at a slightly higher interest rate than standard owner-occupier loans. Interest-only loans can offer substantial tax benefits to investors and free up extra cash for them in the early years of their mortgage.
How do I apply (and get approved) for my home loan?
If you’ve followed the steps above, you are now ready to apply for your home loan. You can choose which lender and loan best meet your specific needs by comparing with Savvy. Once you do this, you’ll be taken straight to the lender’s online application portal.
The next steps ahead for you are:
Apply for pre-approval
Asking your chosen lender for loan pre-approval is the first step in the application process itself. You’ll need to supply your prepared income and expenditure details to give your chosen lender sufficient information to decide if they’re prepared to offer pre-approval. You can receive an outcome on the same day you apply.
Shop around for your home
Once you’ve got pre-approval, you can start looking around for your dream home within your indicative budget, confident that you’ll have sufficient funds to buy it. This usually lasts for around three months, so you can take your time shopping if you don’t find your ideal loan straight away.
Make an offer and seek formal approval
A formal offer to purchase a property (which the real estate agent will talk you through) will include a section about the source of your finance. Being able to specify ‘loan pre-approval successful’ will add to your credibility as a purchaser. Assuming your offer to purchase is accepted, you’ll now need to re-contact your lender and ask for full loan approval. They will want to know details of the property you wish to purchase and will arrange a valuation of the house.
Settle your loan and purchase
On settlement day your appointed conveyancer will arrange for your loan funds to be transferred to the vendor’s nominated account, and the title to the land and property will officially be transferred to your ownership. You’re now the owner of your new home!
What documentation will I need when I apply for a home loan in Australia?
The documentation you’ll need before you make a successful application for a mortgage varies from lender to lender, but all lenders will want to:
- verify your identity, usually with your driver’s licence and/or passport.
- see a copy of your Medicare card, birth certificate and marriage and divorce certificates if applicable
- sight at least one form of ID with a photograph and signature
- see multiple copies of your payslips or proof of regular income, often 3 payslips worth of income is required
- access copies of your bank and credit card statements so they can verify your income and outgoings
- if you’re self-employed, lenders will need to see your tax returns – usually two years of financials
- see proof about the details of any assets you own (cars, boats, caravans, shares etc.)
- see proof of your utility bills, plus any investment or rental income you may have
- find out about your liabilities – what you owe to other lenders in the form of credit card debts, plus other personal or store loans
- know about your monthly living expenses and what spending commitments you may have.
Top tips about applying for a home loan: the dos and don’ts
DO check your credit report
Credit reports can contain errors and credit providers sometimes forget to update records to show you’ve made a payment. You can access your credit report for free once a year, so make sure to double-check everything is correct before you apply for a home loan to avoid any errors getting in the way of your loan being approved.
DO check out all your options before you commit to one lender
It’s important to compare as many lenders and loans as possible before you apply for your home loan. Don’t just look at the big banks; these days, many credit unions and non-bank lenders can offer lower interest rates and more loan features to attract borrowers. Look at all the different options available with Savvy to quickly compare loans before you apply.
DON’T rush your home loan application
Errors made when you apply for a home loan could cause unnecessary delays, additional questions and, in the worst-case scenario, a rejection from the lender. You should make sure all documents you submit are correct, clear, easy to read and in date order. Also, don’t include the personal or contact details of anyone who is not a loan applicant with you.
DON’T change your job immediately before you apply
Lenders look at your employment history when you apply for a home loan and they like to see stability. It’s far better if you’ve been in your current job (or at least the same profession) for a long while and earning a similar amount. Try to plan any career or work moves for after you’re in your new home.
