The term “rental yield” is music to any property investor’s ears. It’s the key metric that indicates the annual return on your investment, essentially the percentage of the property’s value that comes back to you in rental income. In a market like Tasmania, which has been gaining traction for its overall investment appeal, pinpointing the […]
What to Know About the Home Loan Approval Process
By Deltos Finance on July 10, 2024
Understanding the home loan approval process and knowing what to do at each stage can make it less intimidating. Today we’ll guide you through the stages, including what to do before lodging your application, when to apply, important considerations, and the support and tools available to make the process smoother.
Before You Apply: What You Need to Know
Before diving into the application process, it’s crucial to get your ducks in a row:
Check Your Credit Score
When considering your home loan application, lenders will assess your credit score, also known as your credit rating. This score is determined by factors such as your borrowing history, previous credit applications, and any missed payments on credit cards, bills, or loans. You can contact credit reporting agencies like Equifax or Experian for your free credit report and address discrepancies as early as now.
Understand Your Borrowing Capacity
Use online calculators to estimate how much you might be able to borrow based on your income and expenses. Do you have any unpaid huge debts like personal loans or significant credit card balances? Explore multiple ways to reduce them before applying for a home loan, as they could impact your ability to borrow.
Save for a Home Loan Deposit
The optimal home loan deposit amount can be influenced by various factors, but make it a target to save at least a 20% deposit to avoid a Lender’s Mortgage Insurance (LMI). However, some lenders offer options with as little as a 5% deposit.
Gather Necessary Documents
Lenders often require documentation to assess your financial standing. So, before lodging your loan application, prepare pay slips, tax returns, bank statements, and identification documents. Having these ready can speed up the process. If you are self-employed, it’s important to track your income and ensure your tax returns are up-to-date and accurate. This will help provide a clear picture of your income and solidify your credibility as a borrower.
When It’s Time to Apply: Things to Keep in Mind
As you move forward with your home loan application process, consider these points:
Explore Different Home Loan Products
Research different home loan structures, types and features to find what suits your needs. For instance, if you prefer stability and predictability in your mortgage payments, your best bet might be a fixed-rate loan. On the other hand, if you’re open to market-driven changes and are comfortable with the potential for both advantages and uncertainties, a variable-rate mortgage could be a good fit. Alternatively, you can consider a split loan, which combines the stability of a fixed loan with the flexibility of a variable home loan. For home loan features, read up about redraw vs offset to ensure you secure the best mortgage product.
Get Pre-Approval
There are two good reasons you should get pre-approval for a home loan. One, it provides a clear picture of your borrowing capacity. That enables you to search for a property that fits your budget. Second, with a pre-approval, you get to show sellers you’re a serious homebuyer. Learn more about pre-approval through our previous blog titled “Top Six Things You Need to Know About Pre-approval for Loans.”
Consider Engaging a Mortgage Broker
While you can apply for a home loan on your own, there’s more value in engaging a mortgage broker. They can help you navigate the process and potentially give you access to a wider range of loan options. You can count on them to handle the entire application process and inform you if any additional documents are required.
We recommend hiring a local mortgage broker; they have invaluable insights into the local property market and an extensive network of lenders and professionals you may need during your home-buying process. More importantly, the best mortgage brokers in Hobart, Launceston or Devonport can do all the crucial legwork for you.
How Long Does Finance Approval Take?
The timeline for home loan approval can vary:
- Pre-Approval: Usually takes one to three business days.
- Full Approval (also known as Unconditional Approval): This can take 5 to 14 business days, depending on the lender and your circumstances.
Factors that can affect the timeline include:
- The complexity of your financial situation
- Completeness of your application
- Lender’s current workload
- Property valuation process
For more information on the home loan approval timeline, check out our previous insightful blog about this topic: “How Long Do Home Loan Approvals Take?”
Take Your Next Steps with Deltos Finance
At Deltos Finance, we pride ourselves on having one of the highest home loan approval rates in Australia. Our expert mortgage brokers in Hobart are ready to guide you through every step of the process, from pre-approval to settlement.
Every borrower’s situation is unique, so we’re committed to finding the right loan solution for you. With our extensive network of lenders & in-depth market knowledge, we can help streamline your application and boost your chances of home loan approval.
Reach out now, and let’s make your home loan process smooth and successful!
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