When it comes to getting a property loan, the process can seem daunting – especially if this is your first application, but it doesn’t have to be. By being aware of the home loan application process – and the documents and information you may be asked to provide along the way – you can ensure everything goes as smoothly as possible.
The first thing you’ll want to do is research the type of mortgage rates available from different lenders. Home loans can differ significantly and you will want to factor several considerations – including fixed or variable rates, payment plans and other terms and conditions – into your final decision.
You’ll also want to set yourself a budget and determine the amount of money you need to borrow. Getting pre-approved for this amount could be a wise idea if you are still shopping around for the perfect property. Pre-approvals tend to last for up to three months and can help you move more quickly once you have found the perfect property.
During this application process, you’ll be asked for several pieces of documentation. If you are self-employed, you may be asked to show tax returns and other financial information from the past two years, while anyone who is employed will need to show evidence of their pay slips. Group certificates and 100 points of ID may also be requested.
At all stages of this process, it is important to ensure your lender remains informed – they will be able to process your home loan more quickly if they are aware of all the details. This information includes the contact details of your solicitor or conveyancer, real estate agent and vendor, as well as a copy of the contract of sale.
At this point, first-time buyers should complete their forms for the First Home Owners Grant – these can be supplied by the lender or through your solicitor or conveyancer. Once a valuation has been carried out and all the other documents have been received and processed, your lender will grant formal approval on your home loan and the documents will be sent to you.
At this time, you will need to sign these documents and return them. Your solicitor or conveyancer will then liaise with your lender until the loan settles.
If you are a property investor, you are probably aware of the fact that sourcing a loan for investment properties is a different proposition to finding the right loan for a home in which you will be residing. Property investment loans come with different features and options, such as interest-only repayments, and you generally need to have a solid deposit. How much deposit depends on a number of factors.
The minimum deposit you need for an investment property is usually 5% of the purchase price in genuine savings. The dollar amount will obviously vary depending on the cost of the property, and depending on the terms of the loan, you might not need to provide a cash amount.
If you do not have enough for a 5% cash deposit, consider using the equity in your other properties as security for your loan. This will eliminate the need for a cash deposit. Alternatively, you can have a family member, such as a parent or a sibling, guarantee your loan – as long as they have enough cash or equity to cover 20% of the purchase price of the investment property in a property they own in Australia. These options can make it easier and quicker for you to get started in property investment.
You should also allow sufficient funds to cover associated costs, such as stamp duty, borrowing fees, and legal fees for settlement.
Lenders typically calculate the permitted loan amount by taking into account rental income. They may also consider negative gearing. What this means is that you should compare different products to find the right product for your situation and the investment property you want to purchase. This can make the difference between being turned down or approved for your loan.