How to get a Home Loan
There is no quick and easy way to apply for a home loan at this point in Australia. This is mostly due to regulation, banks, policy and burocratic challenges.
It is not for lack of effort as the technology required for simplified loan applications is available, however there are restrictions to allowing technology to do the work for us at this time.
For example, you may be able to submit all documentation online, have a home loan prepared by a person you’ve never met and have a range of lender options presented electronically, but the industry still requires full verification of identity, typically face to face in person with the broker, before a loan application can be submitted. This is to comply with anti-money laundering and counter terrorism Acts, so a good reason but a process which adds to the overall experience.
We at FORDABLE actually like this requirement as we always want to form a personal relationship with our clients if we're working with them on what could be the most important decision in their life. The face to face requirement is one small example of the time challenges we face in the current loan application process. Some other time consuming steps are:
- clients collating their documentation - the volume of documentation can be extensive depending on the applicants personal circumstances.
- the lender assessment turnaround time - this varies depending on their workload.
- the valuation of the property turnaround time.
- responding to any queries a lender may have.
None the less, we are here to assist with all of this!
The below steps are generally what will be required to complete a full home loan application. We have listed these in order of preference for simplicity reasons
Stage 1 - your own preparation work
- Savings / deposit - To purchase any property you will require a deposit. This can be achieved through savings or a few other methods however most lenders will expect you to demonstrate that you have the ability to save money (i.e. you are good with your money and a lower risk borrower).
- Budget - It is important you understand your personal living expenses, what ongoing commitments you have and where you can budget to save money. This also assists to determine what size home loan and the repayments you could afford.
- Liabilities - Review all your existing liabilities and discuss those which could impact your home loan application. Have this information available for your loan application discussion as opposed to attending a meeting with no certainty around this.
- 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 knowing before applying for a home loan as this will surface later if you have a credit issue.
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.
Once you have some understanding of your personal affairs, you should follow these steps:
- Loan repayments - Go to our calculators page and enter $500,000 loan amount with an interest rate (provided on the calculator page) to see what the monthly repayments look like. If you cannot afford that repayment level, then drop the loan amount and vice versa. Understand what loan amount you may be comfortable with.
- Purchase price - Add your loan amount and your deposit amount first 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.
- Market research - Go to your favourite property advertising website (e.g Real Estate or Domain), 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.
If the above steps have you a little stumped, then we can assist you with this, simply book your appointment with a trusted mortgage advisor, go to our contact page and complete the form.
Once your personal affairs are understood and you have completed some research on affordability and properties, you should be ready to speak with one of our mortgage advisors to understand your borrowing capacity.
It is a slightly complex game of chess when a mortgage advisor assesses your borrowing capacity so what you think you are comfortable with for repayments may be vastly different to what a lender may offer.
The borrowing capacity and servicing assessment process conducted with our trusted mortgage advisor will look somewhat like this:
- Getting to know you - Book an appointment with one of our mortgage advisors so we can understand you and your current circumstances, goals and timeframes. This will be a 30min phone discussion where we will also ask for a break down on who the applicants for the home loan will be, what your financial position is (assets and liabilities), plus your income.
- Submit information - After the phone call we will ask you to provide information related to your monthly living expenses, plus we will ask for you to provide evidence of your income (payslips or business financials).
- Assessment - Our mortgage advisors will then assess your borrowing capacity to determine what loan amount you may be eligible for.
- Appointment - Our mortgage advisor will then book an appointment with you to present the information including some lender options who would suit your requirements and objectives. This is a face to face meeting and you should allow up to 90min in case there is a lot of detail you wish to discuss. We also verify ID and certify your ID for your application.
- Application form - Pending the urgency of your home loan application we will either request supporting documentation prior to our meeting or after our meeting, plus ask that you complete an online application form to capture your personal details.
- Audit - Once you are ready to proceed with your home loan application, we will audit and verify all your supporting documentation. We will review all details required for the application and then prepare the application documents for the lender of choice.
- Signing forms - Once the application forms are completed, we will send you a copy with instructions on where to sign the application forms.
- Submission - When you return the signed application forms to the mortgage advisor, the application will be lodged through our online portal.
At this point, you may have spent anywhere from 2hrs up to days, months or years saving for a deposit, preparing yourself for a home loan application and finding your trusted mortgage advisor.
Your mortgage advisor has also spend anywhere from 8hrs up to 5 days (depending on complexity) working on your application and understanding your needs to present the best application possible for the lender.
A mortgage advisor is paid by the lender after the property settles so they place a lot of trust in their clients, to work together effectively and achieve the finance you desire. So mortgage advisors seek mutual trust, respect and willingness to work together for all parties gain.
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.