Your deposit must be ready (or very close to being ready) by the time you submit a home loan application. When the lender asks for it after you apply, you will need to provide evidence that you have a genuine deposit – typically, in the form of bank records that show your savings history.
When do you apply?
It’s useful to apply once you start your property search in earnest. That way you have a clearer idea of where you stand with a lender, and you only spend time searching for properties more likely to be in your budget.
If approved, this part of the application step is called conditional approval (or pre-approval) and gives you a few months to search around.
(There’s nothing stopping you from applying closer to when you’re making an offer. A gentle caution however if you go down this route – the lender may not be able to offer you a loan for what you hope for, and you may fall in love with a property that’s out of your reach.)
What is conditional approval?
Conditional approval (or pre-approval) means you’ve told the lender about yourself and your financial situation, and they have everything they need to confirm the amount you could borrow – working under the assumption that you can verify (or prove) all that you’ve told them. Conditional approval isn’t a promise of a home loan, more like an in-principle tick of approval, pending your paperwork.
When it occurs in the application process:
Conditional approval is granted to eligible borrowers once the initial home loan application step is completed and the application has been reviewed by a lending specialist. The paperwork comes next (see below).
How do you apply?
As for what you need to do, get ready to answer all kinds of questions about yourself. If borrowing with another person, their details will be required too.
- Personal and contact details.
- Citizenship status.
- Employment and income.
- Regular bills and credit limits (rent, cards, other loans, pay later products).
In some but not all cases, you may be asked about your discretionary spending, which in simple terms means your lifestyle-related costs like sporting memberships, travel and so on.
As a guide to the Bank Australia application, allow 15 minutes or so of preparation time, and another 10 minutes to complete the first part of the form. We call you once we have your form and may go through more questions with you – if there are any blanks, for example, and also if you have questions we can help you with. This step could take 3–7 days from receiving your application to us scheduling a call with you.
Getting your initial paperwork sorted
When you first apply, your paperwork doesn’t need to be ready to go just yet. But you will need to provide paperwork soon after if the lender’s assessment of your application is looking good on paper. If you get to this point, the lender will ask you for exactly what they need to see.
As a guide:
- Personal identification documents.
- Proof of employment and income such as payslips, tax returns or bank statements.
- Evidence of your cost of living, savings and your deposit, like bank statements.
Find a conveyancer or lawyer
To ensure you aren’t left waiting at key stages between applying and buying your home, it pays to find someone early on – even well before you choose your lender if you can.
What does your legal team do?
- Check your home loan and purchase contracts to ensure everything is legal and correct.
- Answer any questions you may have about the terms of your contracts.
- Lodge any documents relating to the purchase, including the contract of sale before you sign.
- Advise what documents you may need to provide before property settlement.
Your contract of sale
Your contract of sale becomes binding once signed and your deposit is paid to the vendor (the person you’re buying from). Once signed, be sure to get the details over to your chosen lender.
Good to note is the standard clause in most contracts that makes the offer ‘subject to finance’ for a period of around 14 days.
The clause is there to give you time to sort out your loan. It also protects you should:
- the valuation of your property fall short of what you need
- or the lender determines that they can’t help you with a loan.
The settlement timeframe is set between the vendor and the purchaser when signing the contract. While it can vary and comes down to a variety of factors, standard settlements can be 30, 60 or 90 days.
Final home loan approval
Final approval (or formal approval) is the lender’s first official go ahead that you will be offered the loan. It means that all the paperwork you provided checks out, and that you’re one step closer to buying your new home. This will be communicated to you in writing and, possibly, over the phone.
At formal approval, these things will have happened:
- the lender has all the documents they asked for
- a property valuation has been carried out
- the lender has your signed contract of sale.
Next, your home loan loan contract will be issued. Before this occurs (though it can happen later), you might want to think about how frequently you want to make repayments – weekly rather than monthly, for example, could help you to save money and pay off your loan faster.
Settlement is the time between making a successful offer on a property and taking ownership.
Your solicitor or conveyancer will help you prepare for settlement day, which is the date on which the property title moves from the previous owner to you and all aspects of the sales contract are met. Your lender will then draw down on your loan and payments such as stamp duty are paid by you.
Communication between your legal team and the lender’s will ensure the funds are available when required. Your lender and legal team should be there to help you understand who does what, and when, during this time.
Usually around 60 to 90 days from the date you exchange contracts.
Your first home loan repayment
Your lender will send you a bunch of paperwork with your home loan contract, which will include information about your repayments. They should send you a reminder too about your first repayment amount and when it’s due. Possibly in an email.