What to Expect During the Mortgage Loan Process

As of December 2020, loan commitment in Australia rose by an all-time high of 8.6%, capping at $19.9 billion. This amount is 38.9% more than it was in the same month, last year. It’s a clear indicator that more Australians embrace mortgage loans as the primary means for financing their homes, and rightly so.

Mortgages allow you to purchase a home, even when you don’t have money for it.

For a first-time homebuyer, the mortgage loan process might seem a tad daunting. However, with the correct information, applying for the mortgage will be a breeze. Plus, you could always get help from a mortgage broker.

Today’s post is a step-by-step guide on how to apply for a home loan.

Step 1: Determine Your Budget

The first step in the mortgage process is determining your budget. Here, you need an honest and introspective look into your finances. Figure out how much you can repay and whether the mortgage will take a toll on your living expenses.

A great starting point is reviewing your total monthly income minus the taxes. Add the income from your assets and any other income source to determine your total monthly income. Next, you need to decide on your monthly expenditure without the rent, of course.

Subtract your monthly expenditure from your total income to know how much you can afford to repay. Don’t forget to consider the direction your career is heading and any salary increments you expect.

Step 2: Find Out How Much You Can Borrow

The amount of money you can borrow varies from lender to lender, with some lenders being more generous than others. Your Mortgage Orignator will give you a rough estimate of how much you can borrow and offer ways to increase your borrowing limit.

Most mortgage lenders have online calculators that you can use to estimate the amount you can borrow. Plenty of factors come into play to determine your borrowing limit. Some of these factors include your income, assets, current debt, and the number of dependents.

Step 3: Finding a Lender and the Home Loan Appointment

With help from your mortgage broker, you’ll explore your options and choose a lender that’s best with home loans. The lender will arrange a home loan appointment where you can discuss details about the mortgage.

A few documents are required for the appointment to help the lender understand your finances and chart the way forward. For the loan appointment, remember to carry:

Details of your current income, including bank statements and paychecks

A document that summarizes your current living expenses

Information about your current assets and liabilities

Identification documents including your ID card, driving license, passport, and birth certificate

These documents are enough to let the lender know who you are and your financial situation. The mortgage broker will then help you choose which mortgage loan is best for you.

Step 4: Mortgage Loan Application

Once you’ve settled on a lender, the next step is to apply for the mortgage. Your mortgage broker should help you through the entire process and prepare all the necessary paperwork. If everything works out, you’ll get conditional approval.

Step 5: Conditional Approval

After five days or so, you’ll get feedback from the lender regarding your mortgage application. If the lender approves your application, you’ll receive pre-approval or conditional approval. Conditional approval means that the lender is likely to give you the loan but isn’t fully committed to doing so.

Pre-approval allows you to do some more house-hunting while refining your application. Keep in mind that the pre-approval stage may last up to three months with some lenders.

Step 6: Unconditional Approval

Unconditional home loan approval means that the lender is committed to giving you the mortgage. Once you receive unconditional approval, you can sign and exchange contracts with the house seller. The mortgage broker will be integral for this part of the process.

You’ll probably need a legal representative to ensure that the entire process is up to standards. A legal representative also helps you sidestep unscrupulous lenders.

Step 7: Reviewing Your Mortgage Documents

After receiving unconditional approval, you’ll need to review your loan documents to ensure everything is good to go. Here, your lender will send you a formal letter of offer that shows you how much the lender is willing to give you. Your legal representative will go through these documents to ascertain that they follow standard protocol.

Step 8: Signing the Mortgage Documents and Confirming Settlement

Once your legal representative gives you the green light, you can now put ink to paper and hand the documents to your broker. The loan officer and your legal representative will have agreed on a date to finalize the settlement. The date should be within three months after signing the loan documents.

Step 9: Finalizing Transactions and Moving In

The final step of the process involves concluding all transactions before you can own your new home. Although it’s been a long and tiring process, you can finally get the keys to your new home but don’t forget that you’ll have to start making repayments very soon.

Brokers Simplify the Mortgage Loan Process

The mortgage loan process can be arduous, especially for first-time homeowners. That’s why it’s always a good idea to hire a mortgage broker to simplify the process. We hope the above information will prove useful in helping you through the entire process.

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