Buying a new home? Or, looking for a new home loan? Here’s a step-by-step guide on how to apply for a new home loan.
1. Initial conversation
Generally, the first step of the home loan process involves a quick conversation with your broker or a bank so that they can understand your objectives and identify what features you’re looking for. They’ll usually ask you about your current employment situation and then determine if you’re eligible for a home loan.
2. Complete your application documents
Your application will include filling out a form and providing pay slips, your ID and recent bank statements. If you’re refinancing, you’ll need to provide evidence of all your current debts.
3. Preliminary assessment
Once you are your broker have worked together to choose the most suitable loan, your broker will submit your loan application to your chosen lender.
This part of the process is carried out to identify any potential problems that could arise from a lending perspective. Here, your borrowing power will be calculated and your brokers will asses which lenders can assist with the most suitable loan with the lowest rates for your unique situation.
You’ll generally be presented with two or three recommended loan options to choose from.
4. Submit your application to a lender
Once you’ve chosen your loan, your mortgage broker will prepare to submit your application to the lender. For you, it’ll mean signing the lender’s privacy form and providing any final documents for the lender. Then your mortgage broker will submit the application for you.
5. Conditional approval
Conditional approval, otherwise known as ‘pre-approval’ generally means you have met most of the bank’s lending policies, subject to a property valuation needed.
Usually, a conditional approval means you are still looking for properties and will typically be valid for three months, which is usually enough time to find a suitable property and get your valuation done. You can usually extend this period by providing new pay slips to your lender.
6. Property valuation
Once you’ve found a property, you’ll need to get the property valued in order to obtain your home loan. Sometimes this process can be held up by getting access to the new property. The faster the property valuer can get into the property, the quicker your application will be processed.
7. Loan unconditional approval
Unconditional approval, otherwise known as formal approval means your lender has everything needed to approve your home loan application.
Occasionally, banks may require additional documentation which is not uncommon with larger, more complex loans.
8. Loan offer issued
The lender will send you a loan contract for you to sign once your loan has been formally approved. This is where you’re formally accepting the offer.
Many people run through this contract with their solicitor ahead of signing it.
Once it’s signed, you’ll return it to your lender with any additional requirements needed.
Settlement is the final stage of the home loan application process, where you become the official owner of the property.
For a property purchase, your lender will get in touch with your solicitor or conveyancer advising them that the funds are available. Then, your solicitor or conveyancer will book in a settlement time and date with the lender.
For a home loan refinance, your new lender will arrange with your current lender to repay their loan and take possession of your mortgage title.