Stick to the straight talk and prepare your paperwork for a smooth and swift home loan application process.
Apply for pre-approval
Home loan pre-approval is free. Pre-approval is a conditional offer to approve finance and is highly recommended for property buyers who are making offers in property. Lenders still reserve the right to reject finance. So it’s important to be cautious. Still, get that pre-approval sorted before you property hunt in earnest.
Submit a loan application
Provide documentation on your assets, income, expenses and liabilities.
- Copies of payslips of the last 3-6 months and past group certificates. If you are self employed, you’ll need to supply Business Activity Statements for the last two years
- Proof of current residence
Seek formal approval
Pre-approval doesn’t guarantee that you’ll be approved for finance. Home loans can be denied even after pre-approval is given. Once you have a property in mind, the bank will then assess whether they approve it. Unconditional approval follows this if the lender approves you a loan for the particular property. This will involve a bank valuation on the property, these details are fed through their assessment model and checked by a lending manager.
Why the delays?
Delays in your home loan application can be difficult to contain if things don’t go your way. Lenders complain that they are held up by borrower delays in submitting crucial required documents. Borrowers complain about the time it takes for the lender to grant unconditional approval.
Unconditional approval involves the lender carrying out a number of checks which include a more rigorous assessment of the servicing owner of the borrower, a bank valuation of the property, running these details through the lending model, and the approval of a lending manager.
Before you apply for a loan
How much deposit do you need?
A minimum of 20% of the purchase price is needed to avoid paying a pricey Lenders Mortgage Insurance once-off premium.
What will your repayments be?
Use a mortgage repayment calculator to project your repayments. Lenders will conservatively assess whether you can service your loan given your income, expenses, dependents and other debts along with your credit record. If your loan repayments are similar to what you are currently paying in rent, and you have a history of your own genuine savings, then these are some strong indicators in your favour.
Hit the road as well as the web
Sites like realestate.com.au make searching for buys far easier than the process used to be. But put yourself in the shoes of an agent.
If you have a hot property in a highly sought after area come up for sale, would you give your list of interested contacts (including the full coterie of highly motivated, fast moving, residential property developers and investors) the opportunity to buy it before it you bother advertising it? I would.
Advertising costs money and creates a further time lag for the sale. Agents work for sales. If you can turn a house sale around in a week as opposed to a month with little difference in sale price, there is little incentive for the agent to play the long game unless the seller plays hardball (think Freakonomics). And when a seller plays hardball, they might be unwilling to sell at a fair market price anyway.
Straight talk agents
Make contacts with agents. You want to make it clear to the agent exactly the type of property you’re after.
This will serve two purposes: one, the agent will have you on speed dial for the hot properties which come on the market. Two, you save yourself getting bombarded with the entire sales listings of every agent you deal with.
Go to plenty of inspections and auctions. Property expert Chris Gray says he has to inspect around 200 properties to secure one value purchase. Of the 200 properties, Gray says that 10 may fit his criteria. Of those, seven sellers may be unwilling to sell or unwilling to sell at a fair market value. Of the three left, competitor bids will push two beyond good value.
By the end of the process, you’ll develop a decent barometer of the market. Do you really want to lay down a huge amount of coin on the pot luck chance that one of the first properties you see will be a great investment for you?
Get pest and building inspections and valuations done by trusted professionals with professional indemnity insurance. If you make those judgements yourself and fail, what options do you have for compensation?
Checks you need to make before you apply for a loan
- Ensure you have a steady work history. Six months or more in you current job is looked upon favourably.
- Check your credit record. Pay off any outstanding issues on your record.
- Ensure you have at least 6-12 months of your own genuine savings record.
How to get your loan pushed through faster?
There are two ways to push through a home loan in a rush. Firstly, some of the smaller and highly competent online lenders are able to push through loans quickly.
As some of these smaller lenders are unable to provide loans for the more unusual or difficult properties, a mortgage broker is also an option. They do plenty of work behind the scenes, utilising their experience, connections and business hours (while you are usually tied up with your own jobs).
How long does a mortgage take from application to full approval?
Loan applications can take from 48 hours to two weeks, according to Heidi Armstrong from State Custodians Mortgage Company.
Indicative time frame (non-concurrent):
Lender application – 3-5 business days
Lender’s valuation – 3-5 business days
Lender’s Mortgage Insurance – 1-2 days (if applicable)
For any real estate need either Buying or Selling or Investing , contact me either via email or phone given below.