Top-tips-for-securing-a-home-loan

Top tips for securing a home loan

Pre-approval is essentially a way for lenders to gauge what size loan you could comfortably afford to repay by establishing what your financial position is.

While not a guarantee of your borrowing power (or a lender’s unconditional willingness to loan you the money), it’s a great tool to have in your arsenal come the day when you’d like to drop the auctioneer’s hammer on a new home.

It isn’t always necessary to get pre-approval, but it will give you a leg up on the competition, as well as show both the property owner and your lender that you’re serious.

How to get pre-approval for a home loan

To get pre-approval from your prospective lender, you’ll need to submit a full mortgage application, which includes the following:

A completed and signed application form

ID documents (like a drivers licence, passport, Medicare card, ATM cards)

Evidence of your income (think payslips, tax returns, or a Notice of Assessment if you’re self-employed)

Evidence of your savings and/or your house deposit in the form of a bank statement

Evidence of your current debt status (credit cards, personal loans, and other home loans).

Once you have submitted the complete mortgage application, you’ll have to wait for the lender to assess it. The time this takes will depend on the complexity of your situation and your choice of lender, but it could be as quick as three days (for smaller lenders), or as long as 24 days (if you opt for the bigger ones).

The time it takes to get approved is usually influenced by how much you’re borrowing. If you’re borrowing more that 80% of the property value, then lenders see that as higher risk.

Other factors which could contribute to the length of your pre-approval application process include:

Borrowing with a guarantor

Buying a unique property (rural/regional)

Unusual employment circumstances (contract work, if you’ve just started a new job)

If you’re borrowing through a trust, company, or Self Managed Super Fund (SMSF)

You’re a non-resident living overseas or living in Australia on a temporary working visa.

Pre-approvals generally last up to three months, but some lenders offer ones that last for 110 days too.

After you’ve got your pre-approval and found your dream home, you’ll need to request a property valuation from your lender.

A property valuation will allow a lender to decide whether the value of the property in question meets their lending criteria.

How is property valuation calculated?

Lenders determine a property’s value by considering the condition of the property and how much houses in that suburb are usually worth. A bank valuation will also take into account recent market movements and environmental factors.

The cost of a property valuation varies depending on your lender, and the overall time it takes will depend on the kind of valuation process they decide to use.

How is a property valuation done?

There are different kinds of property evaluation, including:

Full valuation: a comprehensive inspection of the property inside and out, a written report for the bank including photos, the age of the property, its condition and zoning restrictions

Kerbside valuation: an external inspection of the property that mainly looks at recent sales in the area

Desktop valuation: based on relevant sales data and involves no inspections of the actual property

Automated valuation: a stats-driven valuation using the property’s attributes (like number of bedrooms and bathrooms) and recent sales data.

Once your property valuation is complete, you should hear back from your lender. If it meets their requirements, then you will receive final approval for your home loan request.

Once formally approved for the home loan by your lender, your conveyancer will receive the Contract of Sale. From there, you’ll meet with the property’s seller and their conveyancer to discuss the terms outlined in the contract.

What is a Contract of Sale?

In essence, a Contract of Sale is a legal document that binds an agreement between the parties involved in the transaction. The contract terms are negotiated by either party’s solicitors or conveyancers.

While you may be recommended a conveyancer by the vendor, it’s a good idea to hire your own. That way you ensure the contract terms work as well for you as they do for the seller.

After the terms are negotiated and all parties sign on the dotted line, you’ll discuss the settlement date. Generally, it’s four weeks after the contract is signed.

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Top tips for securing a home loan

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