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Odin Mortgage will handle your application and inform you of the supporting documents the lender requires. Evidence that the lender will require at this stage includes
Income: Prove your income using payslips, bank statements, business and personal tax returns, financial statements, and employment contracts. The evidence you submit will need to be from the last few months. Evidence of any other income you have, even sporadic income. Make sure you include overseas income, too.
Assets: Provide evidence of assets such as savings and other properties. You may need to show your bank statement showing the deposit for the home loan in your savings account.
Liabilities: You will need to evidence any credit cards, hire purchases, and other debt that you are liable for. It is a good idea to reduce your debts as much as possible before applying for a home loan. Liabilities will reduce your borrowing power, including unused credit limits. If you have a credit card that you owe no money on, cancel it and increase your borrowing power instantly!
Expenses: Your lender may want to see how you spend your money, particularly if your credit score is lower than usual. You may need to evidence your bank statements to prove your expenditures. You will also be asked how many dependents you have as each child is deemed to be an expense to account for!
The lender will also assess your credit score and credit history before offering you a home loan deal. But, when aiming to secure a home loan, what is a good credit score for Expats in Australia?
You should try to get your credit score to at least 620 or higher to improve your chances of achieving a great home loan deal!
- Conduct a Property Valuation
Once your lender has assessed your application, a property valuation will take place on the home you wish to buy. But, what is a property valuation and how is it calculated?
A qualified valuer will visit the property and make a formal valuation of how much the property is worth. They may provide one of three methods when valuing the property:
Direct comparison: The valuer will assess recent property sales in the area. They will determine the differences and similarities between those properties and the property being valued and make a comparative valuation.
Capitalisation: Capitalisation rates are totalled by dividing the net operating income by the current market value. This valuation method is popular for investment properties.
Summation: An assessment of the improvements to the land are made, such as the size of the property on the land. Additional improvements such as a garage or swimming pool are added to the summation assessment.
This will be sent to the lender who will assess the valuation in relation to the amount of money you want to borrow.
- Don’t Forget about Lenders Mortgage Insurance
Not all home loans will require you to purchase Lenders Mortgage Insurance (LMI). However, if you do need to arrange LMI, now is the time to do so!
Lenders Mortgage Insurance is usually required by a lender if you are wanting to borrow over 80% of the property value. It is recommended to place a deposit of at least 20% of the property value to avoid the requirement to pay LMI.
If you do need to pay LMI, it is an additional cost for you to factor into your expenses each month. The money you pay in LMI does not reduce the amount of money you have borrowed in any way and is an insurance cost.
You will typically need to pay LMI until the mortgage repayments have accumulated to show a 20% equity in the house.
- Finalise the Home Loan Approval
So, your supporting documents have been approved, your credit history has been assessed, and your property valuation has been checked. What next?
You will receive formal home loan approval that your mortgage application has been accepted! You will receive a contract package that you must sign to agree to the home loan terms.
Your package will include the following types of mortgage documents:
Offer letter: This document contains all of the information regarding your home loan. Read everything thoroughly and be sure that you accept the terms of the contract.
Witness acknowledgement: Ask a third party to sign and act as a witness for you.
Disbursement form: Your lender will provide proof of funds.
Loan repayment form: This document will inform you when repayments will be made. Once you have read through all documents, sign your contract promptly. Your solicitor or conveyancer will then start to prepare the settlement and completion.
- Complete the Property Settlement Process
Through liaison with your solicitor or conveyancer, your funds will be released and the property transaction will be complete! You will arrange for your new home keys to be picked up and your moving-in process will begin. This is known as the property settlement process.
How Long Will the Home Loan Process Take?
The entire home loan approval process could take 4-6 weeks on average as long as there are no hiccups on the journey!
Here is an approximate timescale for each stage of the home loan approval process
