Knowing where to start when it comes to applying for a loan or getting approval for a mortgage can be a daunting task.
This article addresses how to go about applying for a loan and exactly what you need to know to get the process underway before starting the search for your perfect property.
Applying For A Loan – The Need To Know Guide
This means all financial records; your pay slips, personal identification, bank statements, proof of savings and more.
The lender wants to see that you have been saving over a long period of time, that you have stability in your workplace, and also that you are capable of servicing the loan.
If you organise all this documentation before you even speak to a broker or a lender it is going to save you a step in the process further down the line.
Get In Contact With a Mortgage Broker:
If you are first homebuyer, or it is your first investment property, getting in touch with the right broker is an extremely important step.
The mortgage broker will require all the documentation you gathered to ensure they know all the necessary information about your financial situation to source the best loan for you.
Different mortgage brokers have different skills and making sure you find one that is the right fit for you is imperative.
It is always a smart idea to get in touch with a mortgage broker before the property hunt even begins, they are going to give you an indication of your borrowing capacity so you know how to focus your property search.
It is easy enough to Google mortgage brokers in your area, but a better place to start would be speaking with friends who have bought property and getting recommendations and referrals through people you know.
Some people may go straight to the bank or lender of choice, but going through a mortgage broker is going to give you access to an array of different lenders. A broker will work with you and find you the lender that is best going to suit you and your property purchase goals.
A broker will compare the market and ensure you get the right loan for what sort of property you wish to purchase and will find you the best rates.
The best thing about a broker is that majority of the time they are paid by the bank once the loan is approved… meaning they are a helpful source of information that are not an out of pocket expense for you.
Once the broker has all the necessary documentation from you to prove that you can service a loan, and they have compared the market to find you the best lender at the best rate for you… They will then prepare the application documents.
They will give you a few options of lenders to choose from, and go through each option with you.
Your broker will give you a credit guide; which provides preliminary information about the service being provided by the lender to you, the consumer.
A credit guide outlines the details of the lender and their terms, fees & charges, where to go if you need to dispute, and a quote for providing credit assistance.
Once you compare each of the few options the broker deems most suitable for you, it is time to choose a lender and submit the application.
Lodging the application at this stage is generally for pre-approval to get an idea of what the bank will lend and what sort of property you can afford. If you find your perfect property will need to lodge a new application for actual approval when that time comes.
Valuation / Approval:
Once you find a property that you want to submit an offer on, you would put a finance clause or condition in the contract – generally 14-21 days.
During this time the lender of choice will arrange a valuation on the property to ensure the property is worth the money they are willing to lend to you, and will approve the loan.
If anything has changed to your personal situation between the time of your pre-approval to the date you submit an offer, you must ensure the broker and lender are aware of those changes for the loan application to be fully approved.
In the 14 to 21 days that you have as a condition of the contract you must ensure the valuation has gone ahead and approval is in place for the property to the go unconditional. The property can only go unconditional if finance is approved by your bank or lender, if approval does not occur within the set time a finance extension can be requested, or you may need to withdraw from that property to avoid financial penalty.
Unconditional / Settlement:
The property goes unconditional on the day that the finance condition expires, usually 14 or 21 days from the date of contract in Queensland.
Settlement will occur not long after this. Settlement is generally anywhere from 30 days to 90 days from the date of the contract.
Once the finance goes unconditional you can have anywhere from 2-6 weeks until the property settles.
At that stage your solicitor will handle the settlement process and the funds will be released from the bank.
After you’ve gone through all of this you will take the keys for your new property.
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