Home loan application process?

The home loan application process is not complicated. A few steps are involved, and you will be one step closer to your dream home.
Find the steps involved in the home loan application process below:

1. Firstly, you need to gather the required documents.
2. The next step would be comparing the rates of home loan providers.
3. The lender will be conducting a preliminary assessment.
4. Submission of application to the lender.
5. The lender will be completing the property evaluation.
6. The loan is either approved or rejected by the lender.
7. An offer is sent to you by them.
8. The funds are advanced to you once the loan is settled.

How to get a mortgage pre-approval?

You need the following documents for a home loan pre-approval:

1. An income proof (payslips, tax returns, etc.)
2. A bank statement and savings proof.
3. A list of liabilities and current assets is required.
4. ID proof ( driver's license, healthcare, passport, etc. )
Also, a pre-approval can not always guarantee your home application to be successful.

How long does a mortgage pre-approval last?

The mortgage pre-approval usually lasts between three to six months. A pre-approval is not allowed for a long duration as an individual's financial condition can change, or even the rates of the property market can fluctuate. A pre-approved loan amount can speed up your application process and can provide a better idea of borrowing power.

How big a mortgage can I get?

The amount to be borrowed for the home loan will technically depend on the following factors:

1. The annual pre-tax salary
2. Other regular or part-time income ( rental income, freelancing, etc. )
3. Living expenses per month
4. The regularity of loan and credit repayments.
5. The history of your savings.
6. The number of dependants on you ( children, etc. )
7. Marital status
8. The type of home loan required ( owner-occupied, investment purpose, etc. )
9. The tenure of home loan.

Different home loan providers will offer a variety of deals, and you can pick up a suitable offer after comparing it with providers.

Common home loan requirements

Know these requirements, and you can speed up your home loan process:

1. House Deposit ( minimum 5% )
2. A good credit history ( good score will improve the chances )
3. A stable income
4. A minimal amount of debts
5. Photo ID proof ( driver's license, passport, etc. )
6. Bank statement and payslips.
7. The council rates for any amount of properties owned.
8. Other required documents.

Criteria for first time home buyers

The first homeowners usually have different requirements and eligibility details in various states, but the most followed process is as follows:

1. You must be at least 18 years old and a permanent resident of Australia.
2. You need to buy the new house as an individual and not as a joint venture or more.
3. You must not have used the grant previously.
4. You must not own home before since the year 2000.
5. You must plan to live in the newly purchased home for a minimum of six consecutive months.

Lenders mortgage insurance (LMI)

Is the lender's mortgage insurance a one-off payment?
LMI or lender's mortgage insurance is a one-time payment, paid during the settlement of the loan. The amount is not required to be paid regularly like mortgage payments, so you will have to arrange for the lump sum LMI payment in advance before purchasing the house. Loans with a deposit of less than 20% will require the payment of mortgage insurance to the lenders.

Is the lender's mortgage insurance refundable?
Lenders mortgage insurance (LMI) is not refundable, at least not for loans settled after 2012. So, by chance, if you happen to switch to a new lender or exit your home loan entirely, the eligibility for the refund will be terminated. To avoid paying lenders mortgage insurance entirely, try to pay a deposit of at least 20%.

Saving for a home deposit
How much deposit is required for a home loan?

The amount needed for the deposit varies in different places, but usually, a minimum of 5% of the property's value is needed, which is an LVR ( Loan-to-value ratio )of 95%. To avoid the payment of LMI, you will be required to provide a deposit of 20% of the property's value.

Different types of home loan

1. Low doc (or self-employed) home loans: Low doc home loans are low-documentation home loans: primarily used by people who have difficulty providing the wealth of documents usually needed to secure a home loan, such as payslips, tax returns, proof of employment, etc. These are commonly used by self-employed people, freelancers, or small business owners, who might not have these.
2. Guarantee home loans: Guarantee home loans (sometimes called family guarantee or guarantor loans) involve parents using some of the equity in their current property to help their children pay for a home deposit. Being a guarantor is not a casual decision, as you are effectively using your home as a security against the loan. If your children cannot meet the repayments, you risk losing your own home.
3. Equity release mortgages: Equity release mortgages are also known as reverse mortgages. With an equity release mortgage, people over 55 can use the equity in their homes to borrow money, either as a lump sum, line of credit, or regular income.
You do not have to pay any interest on an equity release mortgage, but it does compound over time and is added to your loan balance. You should generally speak to a financial advisor before taking out this type of loan.
4. Low income-home loans: Home loans can be harder to get for low-income families, but not impossible. While there is no such thing as low-income home loans, you can boost your chances of being approved for a home loan by:
• Signing along with a partner.
• A guarantor can be used.
• Living with means and applying to a cheaper house.
• A long term loan can be considered as a choice.
• Showing the lender a savings plan with expenses you can cut down on.
5. Foreign income home loans: For the people who earn in foreign currency and wish to purchase a property in Australia, this type of home loan is perfect for them. A wide range of banks offer home loans related to foreign income in Australia, and they will also accept foreign currency, and usually, the currency listed is mentioned on their website.
6. Home loan for students: Getting a home loan if you are a student is quite tough because lenders are quite strict on their income requirements. They will assess your ability to meet monthly interest repayments on a home loan, and as a student, you’re unlikely to be earning anywhere near enough to get a home loan without some serious savings. If you want to buy a house as a student, you’ll need to save up for a deposit. A deposit of less than 20% of the property’s value will attract the lender’s mortgage insurance.
7. Home loans for single parents: Getting a home loan as a single parent is not an impossible task, but might be a bit hard. Lenders assess household income, so only having one income instead of two will make it harder to get approved for a loan. They’ll also assume you’ll have a harder time meeting monthly loan repayments.
Lenders do see Centrelink payments and Government Childcare Benefits as income. Be realistic in what you think you can afford as a single parent when applying for a home loan.
8. Relocation home loans: Relocation home loans, also known as bridging home loans, are loans for people who have bought a new home and are in the process of moving. This loan is used to ‘bridge’ the time between settlements, providing funds for you while you sell your current house using the equity in your home.
Most bridging loans last up to 6 months for existing homes or 12 months if you’re constructing a new home.
9. Rural home loans
Rural home loans can be used for rural property designated as a ‘hobby farm’ – that’s farming for personal reasons and not commercial. Any land that returns more than $20,000 is considered income-producing and may not qualify. Lenders will allow you to borrow up to 95% of the land’s value (100% with a guarantor), but may not offer a loan for a land greater than 10-15 hectares.