How to get a Home Loan
There are a few basic steps to follow when you are ready to get a home loan:
- Step 1 - get your personal finances in order
- Step 2 - complete some property research
- Step 3 - engage a mortgage broker to start an application
Here we break down each point to assist you.
Stage 1 - get your personal finances in order
- Income, savings & deposit - Know what your income is and understand what your base income is vs total income in case your package includes superannuation. This can vary your acceptable income for borrowing capacity significantly. To purchase any property you will require a deposit. This can be achieved through savings, a gift from family or through a guarantee however lenders will expect you to demonstrate that you have the ability to save money and make repayments.
- Budget - It is important to understand your ongoing personal living expenses. If you have never looked at what you spend each month, then now your chance to open those bank account statements and have a really good look. You will need to declare what your ongoing monthly living expenses are to get a home loan. Understanding what you spend money on can also highlight where you can reduce expenses, save money and this process can also assist determine what repayments you could afford.
- Liabilities - It is essential that you declare all liabilities when you apply to get a home loan. Liabilities include credit cards, personal loans, car loans, HECS / HELP study debt and any other monthly commitments you may have. You will need to have all this information on hand when you speak with a mortgage broker and commence a borrowing capacity assessment.
- Credit check - All Australians are eligible for one free credit check per year. If you are unaware of any potential credit issues, it is worth completing a free credit check which can be done through Equifax. All applications undergo a credit check so it's best to know what may surface if you have had some debt and missed payments in the past.
If you need a budget planning tool which can assist you to identify where your money is being spent, try the Money Smart Budget Planner, it's simple and very helpful.
Step 2 - complete some property research
- Loan repayments - To understand how much you may be able to borrow, go to our calculators page and complete the form. NOTE this is not an official borrowing capacity assessment and until you have a discussion with a mortgage broker, then you can use this as a guide. Once you have an indication of how much you may be able to borrow, go to our loan repayment calculator page and enter your estimated loan amount to see what the monthly repayments look like. If you cannot afford that repayment level, then drop the loan amount. This exercise will help you understand what loan repayments you may be comfortable with.
- Purchase price - After completing the above, add your loan amount and your deposit balance to get a rough idea of purchase price. The other items to be considered are stamp duty (how to calculate stamp duty), legal fees and other costs to determine your approximate purchase price. Keep in mind that first home buyers may also be exempt from stamp duty depending on concession available at the time of application. If you are lost at this point and unsure what purchase price you should be looking at, then contact us as we are here to assist.
- Market research - If you have an understanding of your potential purchase price, go to your favourite property listing website (here is our list of the best websites), select some search criteria for your purchase price, location and property specifics to understand what you may be able to buy based on your estimated purchase price.
Once you get to this point or if you need some assistance getting to this point, then simply contact us and we would be glad to assist.
If you have reviewed your finances and have some idea of what property you could buy, your next step is to speak with one of our mortgage brokers to confirm your borrowing capacity.
Step 3 - engage a mortgage broker to start an application
The borrowing capacity assessment and engagement with our trusted mortgage broker will look somewhat like this:
- Getting to know you - Book an appointment with one of our mortgage advisors so we can discuss your current circumstances, goals and time frames. In this 30min phone discussion we will ask for a break down your financial position, your assets, liabilities, incomes and expenses.
- Living expenses and income verification - After our initial discussion we will ask you to provide a break down on your monthly living expenses, plus we will ask for you to provide evidence of your income (payslips or business financials).
- Assessment - With the above information we can conduct and initial borrowing capacity assessment to determine what loan amount you may be eligible for. We will look at lender policy to determine which lender may suit your personal situation and also determine which rates are available.
- Appointment - Once we have options confirmed we will book an appointment to present the information including lender options who would suit your requirements and objectives. We also verify and certify your ID with all applicants at this meeting.
- Application - when ready to apply for a home loan we will request a copy of all supporting documentation and complete a handful of compliance obligations for your application. We will audit these documents, prepare your application and request you sign the lender application forms.
- Assessment - Once the signed application forms are submitted, the lender will assess your application and determine an outcome based on what has been submitted.
At this point, you may have spent anywhere from 2hrs to days, months or years saving for a deposit, preparing yourself for a home loan application and speaking with your trusted mortgage broker. Your mortgage broker has also likely spent days speaking with you getting to know you, your goals and objectives, confirming lender options and working on your application.
As you may be able to appreciate from the above process, there can be a fair amount of time spent on applying for a home loan and a mortgage broker is generally only paid by the lender after a property is purchased and settles. So a mortgage broker seeks mutual trust, respect and willingness to work together so their client gets a home loan and the broker can earn an income.
Once the home loan is submitted, the next phase of the buying process commences, or may have already commenced.
To book your appointment with a trusted mortgage advisor, go to our contact page and complete the form.