Applying for a home loan seems like a scary process. Allow us to demystify it for you and explain the steps you’ll have to take as a borrower.
You might be hoping to purchase an investment property to fund your retirement. Or perhaps you’re a first time buyer aiming to take that initial step onto the property ladder. Regardless of your goals and intentions, you’re going to have to take out a home loan. While it’s not the most complicated process in the world, to the uninitiated it can seem like something of a minefield.
Whether you’re a first time buyer who needs to be introduced to the basics, or you haven’t purchased a home in a while and need a refresher, consider this a short guide for how the process goes.
Finding a lender
The first step is to seek out a lender who will provide you with the mortgage that most effectively suits your needs. Some buyers elect to take care of this process on their own, using the internet or by otherwise individually researching the different lenders out there. While this is possible, it’s worth noting that it’s an incredibly time-consuming process that can also be somewhat perilous if you’re not a home loan expert.
Most Australians elect to use the services of a mortgage broker, who has existing connections with a panel of lenders and can find the most suitable and flexible loan for a particular customer. They can get you in touch with a lender and kick the process off.
For instance, our in-house mortgage broker Rick has over 15 years’ experience and understands all the traps with buying property in small towns like those of the Whitsundae Shire. And since he’s paid directly by the lenders, there’s no fee involved, so giving him a call doesn’t cost a potential borrower anything.
Submitting an application
Next, you’ll need to lodge a formal application with the lender, which you can do through your mortgage broker. This will involve filling out some forms, but also requires the lodging of certain documentation.
Along with the typical identification for confirming your identity – such as a driver’s licence, passport, birth certificate and more – you also need paperwork that will confirm your financial details. These are documents like:
- a recent payslip, or payslips
- bank statements
- proof of any assets
- details of any other debts
Be aware that you’ll need different types of documentation for different kinds of loan. If you apply for a self-employed home loan, for instance, you’ll need to provide individual and business tax returns, while a construction loan will require a building permit.
If you’re making use of a first home owner grant, this would be the point at which you would submit this application, too. If you’re buying a home in Proserpine, Airlie Beach, Bowen or Collinsville, this grant is worth $15,000 and applies only to brand new homes or off-the-plan properties that are yet to be built.
Verification, valuation and approval
The application and the necessary documentary evidence will be passed on to the lender, who will verify the details. They will also get your credit report from a credit reporting agency, and evaluate how much you can borrow based on that and your other documentation.
At this point, if you haven’t yet decided on a property, you can receive a pre-approved home loan for a particular amount, giving you guidance for how much you can purchase. If you have chosen a property, the lender will carry out a valuation of the it to determine whether or not you can afford it, as well as whether it’s an adequate security for the loan.
If all goes well, you’ll get an approval letter in the mail, with some documents to sign and send back. You’re on your way to becoming a property owner or investor!
