So, you’re ready to take the leap into homeownership – exciting times ahead! But before you start visualising BBQs in the backyard or decorating your new living room, there’s one essential hurdle to clear first: securing your mortgage.
While the mortgage process can feel a bit overwhelming at first, it’s totally manageable with the right information and preparation. In this guide, we’ll walk you through each stage – from getting financially ready to sealing the deal – so you can approach your home loan journey with confidence.
Step 1: Get Your Finances in Order
Before you even start browsing listings or speaking to lenders, you’ll want to have your finances in great shape. This means:
- Checking your credit score – Aim for at least 620 or higher for better loan options.
- Paying off outstanding debts – Reducing your credit card balances or personal loans can improve your borrowing capacity.
- Saving for a deposit – In Australia, you can usually get a home loan with as little as 5% down, but a 20% deposit helps you avoid lenders mortgage insurance (LMI) and unlocks more competitive rates.
The cleaner your financial history, the stronger your application will look to lenders.
Step 2: Get Pre-Approved
Pre-approval is your next big milestone. It gives you a realistic budget and shows sellers that you’re a serious buyer.
To get pre-approved, you’ll need to submit some paperwork to a lender, including:
- Recent payslips
- Bank statements
- Tax returns
- Proof of savings or deposit
Once approved, the lender will issue you a pre-approval letter, which outlines how much they’re willing to lend. This becomes your golden ticket when making an offer on a property.
Step 3: Compare Loan Options
With pre-approval in hand, it’s time to compare your home loan options. Lenders offer a range of loan types, including:
- Fixed-rate loans – Your rate (and repayments) stay the same for a set period.
- Variable-rate loans – Your rate can go up or down depending on market changes.
- Split loans – A mix of fixed and variable.
Don’t just look at the interest rate. Take note of:
- Application and ongoing fees
- Loan features like offset accounts or redraw facilities
- Flexibility for extra repayments
Every borrower’s situation is unique, so choose the loan that suits your long-term financial goals.
Step 4: Submit Your Formal Loan Application
Once you’ve selected your preferred home loan, it’s time to complete the full mortgage application. This step requires detailed information about:
- Your income and employment
- Any debts or liabilities
- The property you’re purchasing
You’ll need to submit supporting documents like updated payslips, proof of deposit, and a signed contract of sale.
Your lender will then assess your application. Be prompt if they ask for any additional details – delays here can hold up your settlement timeline.
Step 5: Final Approval and Settlement
You’re nearly there! After your lender completes their final checks – including a valuation of the property – they’ll issue formal loan approval. Once this is in place, the final contract documents are prepared for signing.
Here’s what to expect during settlement:
- A final inspection of the property to ensure it’s in agreed condition
- Signing the mortgage and loan documentation
- Paying your deposit and any applicable stamp duty or closing costs
Once everything is signed, sealed, and transferred, your lender releases the funds to the seller – and the keys are yours!
Final Thoughts
Securing a mortgage doesn’t have to be daunting. With a solid plan, the right guidance, and a bit of paperwork, you can successfully navigate each step of the home loan process.
From prepping your finances to shopping for the right loan and sealing the deal at settlement, being organised and informed will give you the edge. And remember: you don’t have to go it alone. Mortgage brokers, lenders, and trusted real estate professionals are there to help you every step of the way.
Happy house hunting!