Home Loan Application Process
Once you have selected the home loan that best suits your situation, there are a number of documents and processes that you must complete before the lender gives formal loan approval. A good mortgage broker will guide you through each step of the process and help you complete the application form.
Step 1 – Assessment
Step 2 – Conditional Approval
Step 3 – Security Assessment
Step 4 – Lenders Mortgage Insurance
Step 5 – Formal Loan Approval
Step 6 – The Settlement Process
Step 1 – Assessment
At this stage, your lender wants to determine that you can afford the loan repayments. They will conduct income verification and ensure that the information you have provided is accurate.
A credit check will then be carried out to reveal your credit history; in this case the lender will obtain a credit report that will show:
Personal details such as: name, residential addresses, date of birth, drivers licence number and current or previous employer
Records of some current credit accounts
Overdue Accounts (Defaults) which may have been listed against your name, including an indicator on whether the default amount has been paid or not.
Bankruptcy Act Information
Court Judgements and Writs & Summons
Public record information such as Directorships and Proprietorships
As your credit history plays an important part in the home loan application process, it is always advisable to obtain a credit report and clarify any unresolved issues before lodging your loan application.
Step 2 – Conditional Approval
Assuming there are no major issues with your income verification and credit checks, the lender will provide conditional approval for your loan.
Your mortgage broker will inform you of the decision and assist you in compiling documents should your lender require any further information.
Step 3 – Security Assessment
A qualified valuer will conduct a valuation on the property you intend to purchase and any property that will be used as security.
The lender will then assess the valuation and determine if the property is suitable for mortgage lending purposes.
Step 4 – Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance is usually required when you’re borrowing more than 75-80% of the property’s value. It is important to note that mortgage insurance serves to protect the lender from any loss which may occur as a result of a default by the borrower it does not insure your home and contents.
If mortgage insurance is required, your mortgage broker will seek sign-off from the relevant mortgage insurer.
Step 5 – Formal loan approval
If successful in the previous steps, your loan will be unconditionally approved and a formal Letter of Offer will be issued. You will need to carefully read this document, sign and return it to your lender, making sure the information is correct and that you understand all the terms and conditions.
Your realestate.com.au Home Loans mortgage broker will be there to guide you through this step and answer any questions you may have.
Step 6 – The settlement process
Once you have formally accepted the lender’s loan offer, they will issue loan documentation, which should be forwarded to your solicitor who will then liaise with the lender to ensure the loan proceeds smoothly to settlement.
On the day of settlement your lender will disburse the funds; your first home loan repayment will usually be required one month after the settlement date.
More information and home loan help
For more information on how and where to find a better home loan deal from an extensive panel of Australian banks and secure mortgage lenders, or to speak to your local mortgage broker, contact us on 13 94 62 (direct +61 2 9249 3739)
