Home Loan Process

Most lenders will want to see evidence of consistent savings over a period of 3-6 months, which is also known as Genuine Savings. Most lenders also have a minimum requirement of at least 5% of the purchase price as Genuine Savings and the remaining 15% deposit plus Government fees and other costs can be arranged through other means such as a Gift from parents. 

The minimum requirement of 5% Genuine Savings is to show the lenders that you have the disciple and commitment to pay your ongoing mortgage repayments once you settle your loan. 

Your borrowing capacity is dependent on several factors of which the, most common and important factors are your income, property value and location, your current liabilities and your living expenses. The lenders will also take into consideration whether you will be able to maintain the repayments at a stressed level (raised interest rates) to insure that you will not face financial hardship, as a part of responsible lending. 

Each lender will have their risk appetite which will determine how much you can borrow from the property value, which is usually known as the Loan Value Ratio (LVR). Some lenders will allow you to borrow up to 95% of the property value, meaning you will only require a 5% deposit, however, you will need to pay Lenders Mortgage Insurance (LMI). However, with the assistance of Government Schemes or if you fit the lender's LMI Exempt criteria, you may be able to borrow up to 95% of the property value and be exempt from paying LMI. 

LMI is usually applied to those borrowing over 80% of the property value, due to an increased risk to the lender when it comes to recovering their funds in case the borrower defaults. Please note, LMI is to protect the lender ONLY and does not protect the borrower even though the borrower is responsible for paying the LMI, whether it be upfront or included in the loan amount. 

When a borrower defaults on the loan, the lender has the right to sell the security (property) to recover the funds lent to the borrower. In cases where the funds from the sale do not exceed or match the current outstanding loan balance, either the borrower or the insurance company will need to bridge the gap so the loan is completely paid off. In cases where the insurance company pays the lender, you will in turn be required to pay the insurance company in instalments or through other arrangements. 

To discover your eligibility and borrowing capacity, it is best to speak to a mortgage broker as they will take it upon themselves to find a suitable option and also provide a comparison of several eligible home loan products from a variety of lenders that they have access to. Mortgage brokers also have strong negotiation power and can also get exceptions depending on your circumstances. Call us on 0415 075 657 or fill in the enquiry form to get started on the home loan application process today.

After we have collected the required documents and completed a preliminary assessment, we will present and discuss the options with you to clarify any questions that you may have. After you have chosen the lender and product, we will submit the application to the lender along with the documents provided. 

Once the lender has verified and checked the information provided, they will issue either a pre-approval or conditional approval which is subject to a few conditions which may include but not be limited to:

• The property meets the lenders' policy and guidelines
• Property valuation
• No significant changes in your income or commitments/living expenses

The pre-approval is usually valid for 3 months and can be extended if need be by providing new payslips confirming ongoing income. 

Once you have your pre-approval in place, it's time to go and buy your desired property. This can be either at auction or through an expression of interest, but do keep in mind to stay within your budget. Once you have bought your property and signed the contract, let us know so we can order the valuations with the lender. Make sure to order the building and pest inspections within the two-day cooling-off period if you have bought the property through the expression of interest. 

Also, ensure that you have your building and contents insurance in place as you are legally liable for the property once the cooling-off period finishes or after signing the contract at the auction. Once you let us know that you have signed the contract, we'll assist you with organising your insurance policy through Allianz. 

Once the valuations have been ordered and you are satisfied with the current condition of the property, we will submit the contract of sale to the lender along with the valuation report so we can obtain Unconditional Approval.

The lender may also ask for a little more information which may include new payslips or other information regarding your current or new liabilities. It is important that you provide the information requested in full and in a timely manner so there is no delay in getting your unconditional approval. Once everything is finalised, the lender will issue an Unconditional Letter confirming approval of the loan. 

Once you have unconditional approval, the lender will issue their loan offer and mortgage documents to the Mortgage Broker or directly to you for signing. At this stage, you can go through the contract with your solicitor for any legal advice from an independent party. After signing, the documents need to be returned and verified by the lender before we can move to the settlement process. 

Once the lender has certified the mortgage documents, they will then begin the settlement process, which will include getting the funds ready for the settlement date. However, there are things you need to do prior to settlement:

-    Building Insurance:

• The lender will require a copy of your building insurance policy, so it is important to organise this right after the cooling-off period finishes or you sign the contract at Auction, as you are legally liable for the property from that point onwards. 

-    Giving Notice if you are Renting

• If you are currently renting you will need to give notice to your real estate agent. Also do not forget to cancel your utilities at your old address and forward your mail. 

-    Utility Connections

• You will need to organise to have the electricity, gas internet and phone connections so everything is ready to go on move-in day. If you are interested, we will refer you to MyConnect you will be able to assist with transferring your Utilities to your new location for Free. 

-    Removalists

• Please ensure you book your removalists with plenty of notice so they are available on your chosen day. 

-    Funds for Settlement

• Your conveyance or solicitor will advise you of any shortfall of funds required for settlement day. Please ensure these are in your nominated bank account at least two full days before settlement to ensure there are no delays. 

-    Final Inspection of the Property

• Generally speaking, you should organise your final inspection of the property a day or two before settlement to ensure that there have been no changes or anything of concern.