- 3 Aug, 2017

The Home Loan Application Process

Many of us find the whole idea of borrowing terrifying. It’s not just owing such a large sum that’s scary. But, it’s also the application process. However, the good news is it doesn’t have to be like this. Knowing what to expect removes the ‘scare factor’ completely.

Blitzing the Scare Factor

Buying a home is a big commitment. Nevertheless, knowing how to approach home buying makes it no scarier than going grocery shopping.

The simplest way to take the scare out of home buying is:

  • Knowing what you want – Before you apply for a loan, review mortgages. Check out your borrowing power. Then, narrow down your property type.
  • Calculating your deposit – Start saving once you know what you can afford. You’ll need a minimum deposit of 5%. Although, lenders recommend saving a 20% deposit so you avoid costly Lenders Mortgage Insurance (LMI).
  • Working out a savings plan – Work out how much you spend weekly. Next, calculate how much you can save. Cut down on treats and luxuries. Also, set yourself a weekly target. Lastly, give yourself a deposit deadline.

Conquering Home Loan Fears

Financial preparation slays the ‘Fear Dragon’. So, you’ve started saving. Now what?

  • Pay off any debt – If you’ve got other loans, pay these off. You want no other debts before taking out a home loan.
  • Reduce credit card limits – Every $1,000 of credit limit reduces your borrowing power by $4,000. Therefore, if you have a card limit of $4,000, you’ll reduce your borrowing power by $16,000.
  • Save for at least 3-months – All lenders require a minimum of 3-months of genuine savings to approve your loan. Consequently, you’ll need to show that you’ve been regularly putting money aside over this time.
  • Get yourself into good habits – Take control of your finances. Regularly exert restraint. Don’t make any compulsive buys. Over time you’ll develop good money management habits.

The Home Loan Application Process

Okay, so you’ve slain the dragon, and you’re ready to move on. So, where to next?

Once you feel comfortable, then it’s time to apply for home loan pre-approval. Subsequently, this means:

  • Visiting a mortgage broker or lender and reviewing your loan options.
  • Selecting the right loan for you.
  • Filling in an application.
  • Submitting supporting documentation.
  • Waiting for pre-approval.

Mortgage pre-approval means a lender has assessed you for a loan. They’ve then given you ‘conditional’ loan approval.

Pre-approval means that you:

  • Meet the lending criteria.
  • Know how much you can afford to borrow.
  • Won’t need to go through the entire loan process when you find a property.
  • Can start looking for a home.

Next, start searching for a property. You can do this by:

  • Visiting real estate sites.
  • Reviewing properties that fit your needs.
  • Attending open inspections.

Once you’ve found a property, then it’s time to finalise your home loan. With pre-approval, a lender just needs:

  • A signed contract of sale.
  • An independent property valuation.
  • Your signed home loan application.

After you’ve received unconditional approval, you’ll notify the selling agent. Then, you wait for settlement.

Life After Settlement

While it can seem like it’s a long way off, settlement occurs quickly.

  • 30, 60 or 90-day settlements are common.
  • Usually, an 8-week or 60-day settlement is customary in most states.
  • New South Wales typically has a 42-day settlement.

So, how do you know when settlement occurs?

  • The selling agent contacts you to let you know the funds have cleared.
  • You then arrange a time to collect the keys.
  • Then it’s time for the big move and the next chapter in your life.

Are you seeking to buy a home without the stress? Then contact eChoice. Our brokers help you understand your application. Plus, we have access to 100s of mortgage products. So, we’ll help find you a competitive mortgage.


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