Getting a home loan is a time-consuming process that can seem scary to the first-time home buyer. You have all sorts of paperwork to fill out, and you have to deal with lenders.
Generally, the application process will take between four and six weeks, though this varies depending on the state you live in.
Several other factors affect how quickly your home loan application gets processed. How long it takes for you to return paperwork will affect the process, as will your current financial situation.
Your first step in the home loan approval process is gaining pre-approval for the loan. Some lenders call this the conditional approval stage.
Pre-approval essentially gives you an indication of your borrowing power, but the lender still needs to know the valuation of the home you want to buy.
Getting pre-approval requires the submission of a mortgage application, which can take as little as 20 minutes to complete. You must also provide any supporting documents your lender asks for. These may include the following:
• Payslips to prove your earnings. Self-employed people must provide a Notice of Assessment.
• Evidence of real savings that you have ready for the deposit. The lender will usually ask for several bank statements to show you’ve paid into your saving account regularly.
• A form of ID.
• Statements detailing any current debt you have, such as credit card bills.
Your lender uses these documents to determine how complicated your situation is. Debt and other issues can hold up the process.
You can speed things up if you use mortgage brokers, as these professionals will examine your situation and find suitable lenders for you.
The lender should reply to you within three days if you meet the following conditions:
• You work part or full-time and can produce at least two payslips, plus a group certificate.
• If you want to borrow less than 80% of the home value.
The lender will still need to carry out its own credit checks on your application. In particular, they will check if your income is high enough to cover the loan.
Lenders take longer to reply when you have a difficult financial situation. As a general rule, they will take longer to go through your application if you present a high level of risk.
You may have to wait seven days for a reply under the following circumstances:
• You want to lend over $2 million.
• The loan is for more than 80% of the home value. In these cases, the lender usually has to receive Lenders Mortgage Insurance (LMI) for the loan, which slows the process down.
• You’ve recently changed job.
• You work an unusual type of job, such as contract work.
• You’re using a guarantor.
• The house itself is unique in some way. This may mean it’s in a rural area or is outside of the main city hubs.
• You aren’t a resident of Australia.
• You hope to borrow via a company, trust, or self-managed superannuation fund (SMSF).
Each of these issues forces the lender’s credit team to look at your application in more detail. They have to ensure you still meet their conditions, even under these circumstances. You can speed the process up if you provide as much documentation as possible.
Again, mortgage brokers can help you to do this. They will examine your situation before you fill out the application and let you know what the lender may need to speed things up.
You receive pre-approval if the lender is happy with the information you’ve provided. At this stage, you can start looking for a new home.
Pre-approval lasts between three and six months, depending on the lender. You’ll need to find and value the new home during that time.
If you’ve already found a property, you can contact your lender so they can assess it.
The Valuation Process
How long valuation takes depends on your lender. Many will happily use the price stated in the Contract of Sale, assuming you borrow 80% of the home value. Some will carry out a kerbside valuation, but this is usually just to check that the property exists. In these cases, you could receive full approval on the home loan within 24 hours.
But some lenders prefer to carry out their own valuations. This will often take between five and seven business days, as the lender needs approval from the seller. Furthermore, the lender will need to secure the services of a professional for the valuation process.
After Formal Approval
Once you’ve received formal approval from your lender, you can sign your Contract of Sale. You’ll work alongside your conveyancer and negotiate a settlement date during this period. Most settlements take place four weeks following the signing of the contract, though some take longer, depending on the transaction.
How long it takes to get from formal loan approval to signing the contract depends on you and your conveyancer. The seller’s conveyancer usually sends the document, and you’ll arrange a meeting.
Take some time to consider everything about the sale. Also, bear in mind that lenders can take between two and seven days to deliver the loan offer documents to you. You may need to deliver more documents to the lender during this time as well. Getting the loan offer signed as quickly as possible speeds up the Contract of Sale process.
Some Useful Tips
So that’s the general process explained. Now, let’s look at some quick tips for speeding things up:
• Read every document related to the home loan properly.
• Have your documents ready to go when the lender asks for them.
• Make sure your documents are as current as possible.
• Contact the seller straight away if the lender needs to access the home for a valuation.
• Return the mortgage documents straight away.
What to do now
Are you ready to begin the home loan approval process? We at uno can help you get started.
• Find out how much you can borrow.
• Get started with your application.
• Live chat with an uno home loan consultant.
This information is general in nature, and you should always seek professional advice when making financial decisions.