We're Here To Help...
Finding and purchasing a property is a complicated and sometimes emotional decision. Many buyers find their dream home, but realise they must commit immediately or lose the opportunity of a lifetime. What is more, many don't know, or are daunted by, the home loan process.
If you are looking to buy a property, would you know what is required to secure your finance, or have any idea of the long-term commitment of making such an important financial decision?
Here are six easy steps that will guide you through the home loan process, and with a little preparation and organisation, you will be able to minimise the headaches and speed up your mortgage application.
Contact Us - By meeting with us, you may save yourself a large amount of time, effort, and even money in finding the most suitable product and organising your home loan.
We'll analyse your financial situation - We'll do some research on how much you may be able to borrow and do a general search on what features and products are available.
Gain loan pre-approval - Obtaining a loan pre-approval can speed up the mortgage application process, and could mean the difference between obtaining your home loan and missing out all together.
Your loan application - This is where it gets tricky so it is a good idea to have us on hand to help you maintain and manage the process.
Your loan approval - Once the lender has approved your loan application, you will receive a loan offer letter which sets out the legal conditions that apply to your loan.
Settlement - The day has finally arrived! The forms have been processed and your lender will be sending a letter confirming the transaction details.
Analyse your financial situation.
How much can I borrow? - We can assist you to work out how much you can and want to borrow but you should do some initial budgeting. Don't forget to factor in those additional costs that you will be paying including solicitors fees, moving costs, service connection fees and insurance.
Am I eligible for any Grant's? - The FHOG is available to people buying or building a new home. Some of the criteria in getting the Grant are as follows:
You are a permanent resident or Australian citizen
You must be at least 18 years of age
You have the intention to occupy the home as your principal place of residence for a continuous period of six months, commencing within 12 months of settlement or construction of the home
We will be able to go through the further details with you and assist you with your eligibility for the FHOG.
Researching the market - We know and research the market and can offer you more about home loan terminology, costs and features of loan products in the marketplace to boost your knowledge.
Gain loan pre-approval
Obtaining a loan pre-approval, can speed up the mortgage application process greatly, and might mean the difference between obtaining your home loan and missing out all together. We can assist you with the paperwork and provide a smooth and efficient service.
By getting a loan pre-approval, it allows you to shop for property in confidence that finance will be available. It also shows real estate agents, and vendors, that you are serious about doing a deal, which can help in negotiations.
If you are an investor, having a pre-approved loan not only means knowing your top price, it also gives you bargaining power. In addition, you can act quickly once you have seen a property you like.
Who offers it? - Most banks and lending institutions, it costs nothing to arrange and we will help you secure it. Some lenders offer on-the-spot pre-approval that can last up to two months, but this will vary from lender to lender.We'll help you to explore which lenders and products best suit your situation before you settle on a property.
How does it work? - Your lender will look at factors such as how much you earn and your credit history in assessing your ability to repay the loan. On that basis, they'll decide how much they're prepared to pre-approve. We'll help to explore all your options.
How is it provided? - Usually via a letter or certificate verifying that your finance has been approved and for a certain length of time. You can show the letter or certificate to a real estate agent or vendor as evidence that a lender is prepared to loan you a certain amount.
How much will I qualify for? - That will depend on your circumstances and the lender's criteria. We'll assist you to work out roughly how much you can borrow according to your objectives, your salary, and your existing financial commitments.
Your loan application
How do I apply? - This will usually involve completing an application form (or submitting an electronic application), collecting and supplying required information/documents and signing required forms. We will assist you through the application process and can also lodge the application electronically for you.
Do I need building inspections? - It is recommended to have the property inspected for any faults so you are fully aware of what you are buying into. The grounds surrounding the property, under the floor, into the roof and all through the house should be thoroughly inspected and recommendations documented. Professional pest inspections should also be a part of this process.
What documents will be involved in the application? - Typically you will be required to collect and submit documents, which may include the following:
Proof of identity – documents to satisfy 100 point check
Privacy declaration – your permission for the lender and other parties to access and share personal information about you, including your credit history
Documents to verify your income and financial circumstances
Contract for the purchase of your property
How will the lender make the decision to lend me money? - While all lenders have different policies and procedures for deciding on whether to lend money, typically they will look at the following items below.
Credit history – Whether you have a previous good history of paying off your loans or any history of not repaying debts. The lender may request a report on your credit history from an external bureau. The report will list information concerning your credit history, including previous credit applications and defaults if you have failed to repay any other debts.
Serviceability – Whether your income is going to be sufficient to allow you to repay the loan. The lender's assessment will also take into account your repayment requirements on any other existing debts (such as car loans and credit cards). The lender may seek to verify your income. This could involve contacting your employer to confirm your employment and salary, or calling your accountant if you are self-employed. The lender will usually use a loan calculator to work out whether your income is enough to allow you to repay the loan.
Deposit – The amount of money that you contribute as a deposit. The more deposit that you contribute, the more the lender may be prepared to lend you.
Loan to Valuation Ratio (LVR) – This is the term that lenders use to define the proposed loan amount as a percentage of the property value. Lenders generally utilise LVR based limits to determine the maximum amount they will lend, for any given property value.
Valuation - The lender may seek to check the valuation of the property that you are financing. There are various ways of doing this, ranging from a desktop valuation (comparing the value of your house to other recent sales in the local neighbourhood), to a full valuation by a licensed valuer, including an internal inspection of the property. The lender may sometimes request you to arrange access for a valuer to inspect your property and may require you to pay for the valuation.
Sometimes the lender's assessment of the property value may be less than your estimate, or less than you actually paid for the property. The valuation of the property is important to the lender, because it affects their Loan to Valuation Ratio ("LVR") calculation. Depending on the lender's LVR policies, this may impact the amount they are prepared to lend to you.
Lenders' Mortgage Insurance ("LMI") - LMI is an insurance contract for the benefit of the lender, which allows them to recover certain losses if you default against your loan and they are not able to recoup the debt and their costs via other means. Most lenders require certain loans to carry LMI. If required, we or the lender may arrange for your loan application to be sent to an LMI insurer. The LMI insurer will also perform a credit assessment on the loan application and will advise the lender directly whether or not they are willing to insure the loan.
If the loan LVR is above a certain level (generally 80% for a Full Doc loan), then the lender may require you to pay the LMI premium. Most lenders will add the LMI premium to the loan amount, so you don't need to have the money available in advance.
Sometimes, the lender will pay the LMI premium themselves, at no cost to you. Generally this will only apply on loans with an LVR below a certain level, for example, 80% or less on a Full Doc loan.
After the lender has taken the above information into account, they will make a credit decision to approve or decline the application.
What are the types of credit approval?
Indicative – May be advised by a lender based on a general description of your circumstances, prior to you lodging any formal loan application. Not a loan approval, but rather, an informal and indicative advice that you appear to satisfy the lender's general criteria for a given loan. Can be helpful during the shopping phase to get comfort over how much you can borrow.
In-principle – This is a firm indication that a formally lodged loan application initially meets the lender's criteria, when the applicant is not in a position to supply some critical details. Generally this is because the property has not yet been purchased. Can be useful to "lock-in" finance before you actually purchase a property, for example, if you plan to bid at an auction or plan to make an offer in a private treaty sale.
Conditional approval – A firm approval in response to a formal loan application, but the lender has a specific requirement that must be satisfied before they are prepared to make the approval unconditional. For example, conditional approval subject to you providing proof of your income, or subject to the lender obtaining a satisfactory valuation of your property.
Unconditional approval – Fully approved, without any conditions. In the next step, the lender will make a formal loan offer and supply formal loan documents. From this point, the process can move into the fulfilment stage.
Your loan approval
Once the lender approves your loan application there are a series of events that will occur.
Lender's offer letter - Once the lender has approved your loan application, they will send you a loan offer letter. This is an important legal document that sets out the conditions, including interest rates, which will apply to your loan. It is important that you read this letter carefully and ensure that you understand and agree with the contents. If there is anything that you do not understand or agree with, you should seek advice from us, solicitor, or the lender.
Lender's loan terms and conditions - Along with the offer letter, the lender will provide you with a copy of the detailed loan terms and conditions, which can be in the form of a contract, or a booklet. This is an important legal document, as it sets out the terms, conditions and obligations of you and the lender. Again, it is important that you read this document and seek advice from us, solicitor, or the lender if you are unclear about these terms and conditions.
Accepting the loan offer - When you are happy to proceed with the loan and are confident that you understand and agree to the conditions, you should arrange to sign and return the documents to us or as the lender requests. Remember, that you will be entering into a legally binding contract, so be sure to seek advice if there is anything that you do not understand.
Arranging a mortgage over your property - Once you have signed the loan offer, the lender will start to make arrangements to take a mortgage over your property. At this point, if you have not already done so, it is best to engage a solicitor or licensed conveyancer to assist you.
A mortgage is a legal mechanism that provides the lender with rights over your property (security) in the event you fail to fulfil obligations under the loan contract. In essence, the impact of a mortgage is that you cannot sell or transfer ownership of your property, until such time as the lender has received all of the money to which it is entitled under the loan agreement.
If you fail to fulfil your obligations under the loan contract, particularly in regards to making scheduled loan repayments, an exhaustive process will apply which will include as the final step, the lender's right to sell your property.
As part of the mortgage process, the lender will undertake various procedures such as title searches to ensure that you are, or will become, the rightful owner of the property. These procedures are most effectively handled between the lender and your solicitor or licensed conveyancer.
Arranging the settlement - The last step prior to settlement is arranging a settlement date. While this may sound straight forward, in certain circumstances it can be quite complicated. For example, if you are refinancing a property that you currently own, it will involve coordination between the outgoing lender and the incoming lender. If you are purchasing a new property, it will involve coordination between the seller's solicitor and their lender, along with your solicitor and your lender.
Your solicitor, ourselves and the lender will pre-arrange with you what money will need to come in (for example your deposit) and what money will go out, for example payments to the seller, stamp duty, your conveyancing and other costs.
Settlement is a fairly complicated process that involves coordination between numerous parties such as: real estate agents, solicitors, mortgage brokers, lenders, and the land titles office. Your solicitor along with us can be invaluable in managing this process for you.
Settlement for a new purchase involves the transfer of money from the buyer to the seller and the transfer of the property title from the seller to the buyer. At the same time, various other costs are settled such as stamp duty, rates adjustments and solicitor's fees.
Settlement for a refinance involves the old lender releasing their mortgage and receiving money to discharge the old loan, while the new lender takes out a new mortgage, creates a new loan and pays money out to old lender.
Once settlement has been completed, you will be advised by your solicitor or conveyancer. Within a few days, your lender will generally send a letter confirming the transaction details. It is important to follow up anything that you think may not be correct as soon as possible.
Your new loan account should be available within one day through the available access channels such as the internet, telephone, or ATMs, so it is a good idea to log on and make sure that everything is working appropriately.
From this point on, your new loan account is up and running. Remember to keep in touch with us if you have any questions or further requirements.