How to Prepare Yourself when Applying for a Home Loan – What To Expect

Applying for a home loan is certainly an exciting experience. After all, you will soon be the owner of a new house – which is probably the house of your dreams, since you decided to apply for a home loan to get it.

However, most people forget that they have to properly prepare themselves when applying for a home loan. It’s not as easy as submitting some documents and waiting for their approval.

Remember that your loan application can get rejected. Thus, to prepare when applying for a home loan means doing your very best to avoid it being rejected.

Of course, by using a mortgage and finance broker at Highline Lending we are supported by over 60 banks and we do all the work for you. We’ll assess your financial position, choose the most suitable lender with the best deal for your circumstances and do all the work to make sure your loan gets approved. Better yet, as we get paid by the banks, our service is completely free to use. But, lets run through some of the basics and what is involved.

Home Loan Documentation

Obviously, the first things you’ll have to take care of are the documents you will need for your home loan application.

The checklist below shows some of the information you may be required to present – remember to check with your lender or borker beforehand to make sure you don’t forget anything.

Personal Information – full employment history, all current and previous addresses, details regarding your current assets (cars, boats, properties, and such), proof of income, current outgoing expenses.

Employment Documentation – records of your salary, latest notice of assessment and/or group certificate, two years’ worth of tax return (in case you are self-employed or cannot show proof of salary), tenure of employment letter from your employer (if possible).

Other Documentation – proof of identification, copies of recent credit cards statements, front page of the sales contract, six months of bank statements (confirmation of genuine pattern of savings), council rates notice for any of the properties that you own (including investment properties), confirmation of rental income, completed FHOG application (if applicable).

The required documents differ from lender to lender and depending on what type of home loan you are applying for. Purchasing a property for example, is not as complex as the documents required for a construction loan. There is also alternative type of home loans that require very minimal to no documentation at all, knows as Low Doc Loans.

Expenses Budget

First-time homebuyers often think that there will be little to no costs of buying. They think that, if they apply for a home loan, it will cover these expenses as well.

Obviously, a lot of people know about these costs – but some don’t realise how many of them are actually involved when buying a house. Before a home loan application, you should prepare for the following:

Lenders Mortgage Insurance – if you are borrowing more than 80% of the property’s price, then you will need LMI (lenders mortgage insurance). The purpose of this insurance is to protect the lender in case you will no longer be able to meet your monthly loan repayments.

Stamp Duty – this refers to the taxes that will be put on the mortgage documents and on the property by the government. Keep in mind that the value of the stamp duty is influenced by the property’s location and a couple of other factors as well.

Conveyancing – this is the process of transferring the property’s ownership from the seller to the buyer with the help of a solicitor or conveyancer. Conveyancing is, essentially, the written process behind the buying and selling of a home.

Contents and Building Insurance – once the property’s contracts change hands, you’ll have to think about getting coverage for both contents and building. You will have to get a policy that covers the property’s chattels, such as tiles, carpets, and curtains (contents) and the brick and mortar of the property (building).

Moving Costs – such costs will usually vary from case to case, but they usually include cleaning, utility connections, removal, as well as the costs of a moving company.

Strata Searches, Building and Pest Inspections – naturally, you’ll want everything to be in order with your new property. This is why you should take some time – and pay some money – to organise a strata search, as well as pest and building inspections before you actually buy a property. Your conveyancer, real estate agent or mortgage broker can assist with this.

Some of the above costs are indeed optional, but most of them are necessary for the good completion of a property’s purchase.

If you worry too much about your loan and don’t plan for these expenses beforehand, you might lose the opportunity of buying your new home. Naturally, getting your home loan approved is important – but affording these other costs is just as important.

Making Plans in Advance

Preparation is, basically, making plans in advance for something that’s about to happen. This is exactly what you should do when it comes to applying for a home loan.

You’ll have to take a look at your savings, employment, the deposit that you wish to put down for your loan, and so on. If you forget anything, you risk your home loan to be rejected.

Deposit – the ideal, common deposit is of 20% to avoid LMI. The addition of LMI however, gives you the opportunity to purchase a property with as little as 10 or even 5% deposit. You must show the lender that you have the money for a deposit and that you are able to pay conveyancing, discharge costs, and stamp duty.

Savings – lenders will have no issue with your home loan application if you show proof of consistent savings. Important here is the fact that they must have been achieved through your own income. To further prepare for an application, spend at least 6 months for the saving of a deposit in a designated savings account. Genuine savings are mandatory when applying for a home loan with a deposit less than 20%.

Income and Employment – lenders prefer you to be in a job for at least 12 months when applying for a loan. However, many of them do accept as little as 6 months if you show proof of working in similar industries throughout your career. In short, do not make a job or career change before you apply for a home loan. We also have lenders on our panel who will accept employment as little as 1 day!

The Bottom Line

Finding a suitable home for you and your family is the easiest thing you’ll be doing while you go through the property purchase journey. This is why you shouldn’t spend too much time – or money – for its finding.

Instead, you should focus on everything you need to get in order to make your application undeniable. Searching for the property won’t be much use unless you have the loan in place to support it! Commence by contacting our office on starting a pre-approval. The pre-approval will give you confidence and buying power knowing you have approval in place prior to shopping around for a property.

If you have any uncertainties or need more help with your home loan application, you can get in touch with us. Our team of experts will guide you through the process of finding the loan that suits your needs – as well as help you prepare for the application.

For any questions or information about home loans, we’re here to help you in any way we can! Contact us on on 02 9121 6247 or submit your scenario online.