How to apply for a home loan

When you’ve made your shortlist of candidates, it’s time to approach a lender and make a loan enquiry. There are two main ways that hopeful borrowers can approach a lender: you can apply directly to a provider – at a branch, online or via a comparison site such as Canstar, or seek out a home loan via a mortgage broker.

How to approach a bank or lender to make a home loan enquiry

After comparing home loans on the market to find out what’s potentially on offer, it could be a wise idea to contact banks that you already have a relationship with to ask them about their loans. Sometimes, lenders will offer special rates, deals or packages to existing customers that you may not otherwise be able to learn about. It could be a good idea to ask them about deals they offer to new customers, to see how they stack up against what you’ve been offered.

Whichever bank or lender you choose to apply to, it may be possible to apply online, or alternatively see pre-approval online. If in doubt, you could try ringing the bank or lender directly (if they have a call centre) and asking to speak to someone who specialises in home loan lending. Some banks allow people to apply completely online, but it could be a good idea to start by making an enquiry online first, so you can receive greater detail about the conditions of the loans you’re looking at and what the application process involves. Then, compare each one.

It’s important to remember that each time you apply for a loan, it’s recorded on your credit history. Multiple home loan applications can affect your credit score negatively, which could have an impact on your ability to borrow money in the future. Therefore, it pays to think carefully before making a formal application for a loan or for pre-approval. A loan enquiry – just asking a lender for information – is typically not recorded on a credit report. If in doubt, ask the lender.

How to use a mortgage broker for a home loan

Mortgage brokers are service providers that sit in between lenders and borrowers. They can negotiate a loan on your behalf and organise the paperwork and other requirements. There are a large number of companies and individuals operating in this space, and they must have suitable qualifications and an Australian Credit Licence. The Australian government’s Moneysmart website cautions to make sure you are dealing with a properly licensed mortgage broker.  You can use the Australian Securities and Investments Commission’s (ASIC) Professional Registers to check if your credit provider has been licensed or you can phone ASIC’s Infoline on 1300 300 630.

It’s important to note that not all mortgage brokers will necessarily offer the full range of home loans to you. Some are bound to a certain set of lenders. Mortgage brokers make their fees in a number of ways during the home loan process. It could be a wise idea to find out what fees and charges apply, including any commissions that a broker may earn from a bank.

Typically, a mortgage broker will talk to you about your needs and your financial circumstances, and help you to determine what loan or loans could suit you. The will then go to the lenders (typically the ones “on their books”) and creates a list of options for you to consider. Once you choose a loan, the broker generally handles the application process (although you’ll most likely have to complete a number of online forms and supply all necessary information). The broker will then typically also co-ordinate the financial settlement of your purchase.

Step 3: Apply for a home loan

Now you’ve gathered enough information, after talking to your mortgage broker and/or making enquiries to lenders, it’s time to choose which loan you want to apply for. Applying for a mortgage usually means filling out forms and providing any documents or information that the lender requires, which will typically include those mentioned above in step one.

When do you apply for a mortgage?

You may choose to apply for conditional approval, otherwise known as preapproved finance, before searching for a property, as this can give you security in the knowledge of how much a bank or lender might be willing to offer you. However, even if you choose to seek preapproval, this does not guarantee your actual home loan application will be approved, and you will make this application when you have a property picked out that ou want to purchase.

When you’re ready to make your mortgage application:

• If you made a loan enquiry previously, details of the application process should be included with that correspondence.
• A lender’s website will have information that tells you how to apply, or even a portal that allows you to apply fully online.
• If you’re going through a mortgage broker, they’ll manage the application process, which could also involve using an online portal to exchange and verify documents, and/or providing necessary information in person.

It’s a good idea to have access to a document scanner or a smartphone with a high-resolution camera, to allow you to send copies of all documents to your lender or broker via email or their online application portals.

It may be necessary, in some circumstances, to have a witness to your signature or copies of documents, such as a Justice of the Peace (the lender will likely have rules around this). Usually, a lender will require documents presented in PDF format and photos in JPG. Bank, share and super statements can typically be downloaded in PDF format from the organisations’ online portals.

When applying for a home loan, lenders will typically want to know:

• What you want to buy or build: Unless you’re applying for pre-approval, the bank will need details of what you intend to buy or build. This is so the lender can perform a bank valuation (have its specialists take a look at the property to see if the amount you are paying is an acceptable risk to it). If purchasing, they need a copy of the signed contract of sale. If building, they’ll need a copy of the construction contract and details of the land’s location and price.
• Any grants or assistance you are using to boost your deposit: If you’re getting help to pay your deposit, the lender could also ask for details. This would include if you have applied for a grant (or intend to do so), and if someone has given you money to boost your deposit. For example, if a relative was gifting you funds for a deposit, a lender may require a letter from that relative detailing the conditions of that gift or loan (such as if you have to pay it back).
• Your conveyancer or solicitor’s details: The bank or broker will need to know who’s doing your conveyancing – the legal work involved when buying a property. It could be a good idea to talk to your conveyancer about what level of involvement you need to have in the process, such as if you need to chase the bank or broker to find out if you have been approved or if they will do that for you.

Step 4: Wait to see if you’re approved

When you’ve completed all of the application requirements, typically your lender or broker will keep in contact with you about its progress. It could be a good idea to make sure the bank is aware of any finance clause in your contract, and when it expires. Typically, your conveyancing solicitor will be able to help you navigate through this area.

If you’re approved for the loan, the lender will typically issue you an official document (the home loan contract) that states the conditions of the loan. This would typically be forwarded to the seller’s solicitor (usually by your solicitor), which would mean any finance clause of the contract would be met.

The lender then has a set amount of time (as detailed in the contract) to settle the loan (or to provide the funds to the seller and activate your home loan). Seek professional advice.

If you’re not approved for the home loan, then Moneysmart suggest you seek information about why this occurred. Your conveyancing solicitor will generally be able to give you advice about what happens to the contract of sale, and if you would forfeit any deposit that you have paid.