If you've got the deposit, it's time to apply for a new home loan / mortgage. Here's how you do it…
Choose the Right Loan
Getting the right loan for your needs is complex, so pay special attention to this part of the process. Your comparisons on WhistleOut will help you pick the right loan, but you need to make sure that you've thought about the key features in a home loan and how you might use these features to your advantage during the loan term.
There are a wide variety of home loans to choose from and they are not just differentiated by interest rates.
Spend some time perusing the different options and consider carefully which type of loan will work for you both now and in the future. Read our description on Types of Home Loans for more information.
Some home loans offer flexible features that allow you repay the loan more quickly; other loans offer repayment certainty via fixed rates, or the opportunity to redraw cash from the loan when you need it. Alternatively, there are basic variable rate home loans that offer lower interest rates and fewer features.
Pre- Approval
Getting a pre-approval means that you have passed the first round of the home loan process. This means that in a technical sense, a lender is showing that you meet the criteria to borrow a certain amount.
Importantly, you are not forced to take the loan with the specific lender who gives you pre-approval as it really is just a starting point.
There are many types of pre-approvals offered by lenders. The reason for this is that lenders are all trying to offer 'fast pre-approvals' in the hope of building a relationship with you and securing your business at a later date so they offer super fast pre-approvals to get you in the door.
However, the super fast pre-approval is the loosest type of pre-approval in that it is an ‘indicative' pre-approval which means that everything you have submitted on a website or via fax ‘indicates' that you will be approved for a loan. It is not a formal approval and you have not secured funding from a lender. You can't get a home loan and funding secured in 60 seconds.
Home loan pre approvals are usually valid for several months and can often be extended if you require. A formal pre-approval will let you confidently make an offer on a property or bid at auction knowing exactly what you can afford.
Phone-based pre-approvals through to informal and formal written pre-approvals are all available, however formal pre-approvals are the best step.
Tip: We can do a needs analysis on the phone and get pre-approval for you.
Call our phone team to secure your pre-approval and to meet with your preferred lender face to face. Details
How Long Will I Have My Loan?
Most Australians take out a loan term of 25-30 years, but only keep the loan for around 4-7 years as they usually re-finance within that time. Re-financing means paying out your existing loan with the newly re-financed package. Knowing this, there is every indication that you won't have the loan for life and you will re-finance before the end of the loan term so think about the best loan for your target time frame.
Think about your exit points and where you want to be in 5-10 years.
Loan Application Process
The loan application process begins with securing the best rate from the lenders, then meeting the lender that meets your needs best.
Through our home loan service, the mobile lenders from each of the big banks will make a visit to you to help you apply for the loan.
It will take a few days (and longer depending on demand with the lender) to process your application. Throughout this time the lender might issue ‘conditional approval' whilst credit checks are undertaken and documentation is processed.
The lender will inform you if they require a valuation of the property you wish to purchase.
Information the Lender Needs
In order to negotiate the best rate with the lenders for your loan, our phone team will need to ask the following questions.
Application Documentation
The documentation required by lenders can vary - the general rule is to be prepared with the following documents:
- Identification: Naturally, 100 points of ID will be required if you are not currently known to the lender. A combination of the following items is usually acceptable; drivers licence, birth certificate, Medicare card or credit card. Original documents are required.
- Employment: You will need to provide details of your employment history including recent salary slips and a letter from your employer which describes the length of your employment and income. It is a good idea to get a record from a previous employer, especially if you have changed jobs in the last 2 years.
- Tax Returns: Recent tax returns, bank and credit card statements
- First Home Owner: First Home Owners Grant (FHOG) application form
- Contract: The first page of the property sales contract ?
Apply to Borrow the RIGHT Amount
You will need to establish how much money you need to put down as a deposit on a property and how much you need to borrow.
To help assess how much you will pay for your new property and to start house hunting, you should gauge the median property prices in your target area and the prices of similar properties in the area.
You can experiment on WhistleOut to see how much each loan amount will cost you on a monthly basis and compare this against how much you think you can afford to repay.
You will need to be realistic about what you can afford today, and realistic about what you can afford if interest rates go up or down. You can research types of mortgages and repayment options on WhistleOut before you go to the next step and talk to our phone team about meeting with a lender.
Remember - interest rates will rise and fall so you really do need to factor this into your budgeting.
If the monthly repayments you find on a loan look manageable you can roughly calculate the deposit you will need. Some mortgage lenders will loan you up to 95% of the property value so a 5% deposit is required (your deposit will also need to cover fees and charges like Mortgage insurance, Stamp duty, Valuation fees, Loan application fees, Legal fees, Building and pest inspections.
Importantly, mortgages with a high loan to value ratio (usually for those loans above 80%) usually incur Lenders Mortgage Insurance (LMI) and this is an additional fee. This insures the Mortgage Lender, not you, against you defaulting on mortgage repayments. You will pay a higher premium for Lenders Mortgage Insurance so some borrowers choose to put down a larger deposit (usually 20% or more) on a property and borrow from a lender without incurring this additional expense.