If you are in a hurry – take a deep breath
This page is about the loan application process which is just one part of the home purchase process – if you would like information on buying a home then our Home Buying Guide might be your best place to start.
Unfortunately in their quest to protect you the consumer regulators are forcing brokers and lender to provide an ever increasing amount of documentation and their assessment of your application will not even commence until the last supporting document is provided. Below you will see a rough time line of the stages.
The home loan application process is actually straight forward as long as we all understand the requirements and all the roles. Keep in mind that there are many people involved these include lenders, valuers, building and pest inspectors, lender’s solicitors, seller’s solicitors and your solicitors, vendors ( the people selling ), real estate agent, tenants (if the property is currently rented), mortgage and general insurers. Then there is you of course and finally your broker. Important point – unlike many brokers we do not outsource any of the process – sometimes offshore – and so you can be confident that your information is kept internally within Peach.
Your Loan Application
In a nutshell:
- we find out what you want and what you need – 15 to 30 minutes
- we make a recommendation – 1 to 4 hours depending on complexity
- when you agree we request any additional documentation specific to the lender that you choose – this is in your hands
- once we have all documentation we prepare the application and provide to you for signing off – 4 to 6 hours
- application submitted to lender online and will be taken up for assessment between 24 and 72 hours – this can vary dramatically with lenders often being overwhelmed due to a product promotion – recently some lenders have taken 3 or more weeks just to start the assessment. Once assessment is commenced and all supporting documents accepted assessment typically takes 24 – 48 hours
- application is approved, mortgage documents prepared and posted or emailed to you – typically 3 days
- documents returned to the lender and checked – if a refinance is involved the existing lender can delay their discharge and therefore the settlement by 2 weeks if they see fit
- settlement booked between your solicitor, the bank’s solicitor and the vendor’s solicitors – typically 3 days
- money handed over and settlement finally complete, crack open the champagne you are now the proud owner of a new mortgage
Now for the details…
The following information is simply trying to set your expectations to ensure that you fully understand the process and potential obstacles. We rely heavily on the internet for document transfers either via our secure document upload facility or by email.
We will normally start with a short 15 minute telephone discussion in order to get a clear understanding of your current circumstances and your aspirations. No two applicants are the same and we will often turn up vital information, the importance of which may never have occurred to you. Once we are reasonably confident that we can assist we will probably look to complete an Application Assessment form and we will ask to see recent copies of your pay slips and some other documents- this is a critical regulatory requirement in the process.
Once we make and you accept our recommendation we will provide you with a detailed list of supporting documents that are required. These vary from lender to lender and on the type of deal – see below. We will also provide you with a detailed quotation, commission disclosure and lender’s application and privacy consent form – I repeat we cannot proceed with an application until these are returned.
We normally prepare the formal application online using the copies of all the supporting documents that you have provided. Before submitting we will provide you with a detailed summary of the application and we will ask you to double check and point out any corrections that are required. Only then will we actually submit the application.
We then liaise with the lender in order to get the application through the approval process. Sounds simple when you say it quickly – the different stages of approval are outlined below. When your loan is unconditionally approved the lender instructs their lawyers to prepare the mortgage contract. Once these loan documents are issued and accepted by you then our role is largely complete and the settlement is usually coordinated between your legal representative and the lender.
Generally we are not authorised to discuss your offer with vendors or their agents, nor to instruct your lawyer. For loans that are not using a FastRefi option we will normally arrange for discharge documents for existing loans being refinanced, however beyond that we have no input into the discharge process as the outgoing lender will not recognise us or discuss your discharge with us so you or your lawyer must pursue that process. The settlement process is coordinated between your lawyer and the lender, we assist where we can however we have no role in the settlement.
Document Check List Important Tips
Please understand that the document requirements are often dictated by the regulators – ASIC and APRA rather than the lenders. In these cases we have little or any room for flexibility so if you will have difficulty providing anything – please give us as call to discuss the best alternative options.
You will be provided with a document check list, each lender has slightly varying requirements. Please pay close attention to providing exactly what is asked for and unless otherwise stated please ensure that documents are the most recent available. You have an obligation to disclose any pertinent information and we are obliged to inform the lender of any information we consider pertinent to your application.
We will provide you a document upload facility or you can email – we prefer pdf files and if scanning save as JPEG (jpg) file format. If you are using a tablet or mobile phone please download a scanning app rather than just using the camera ( Genius Scan is free and available for iOS and Android) ensure the document is well lit, the image is centred correctly and nothing is cut off. The following is a typical checklist:
Payslips must be most recent and where multiple are required ( can be up to three) they must be consecutive – feel free to black out your tax file number. They must clearly show your employers name, your name and preferably annual salary or YTD figure that allows an accurate annual figure to be calculated. If your pay slip does not comply please provide most recent ATO group certificate or assessment notice. Alternative documents (check specifics) normally a signed letter from employer on letterhead.
Bank internet statements can be acceptable but they must be a complete document (all pages) showing borrowers name, account numbers, balance, limit and transactions for the period specified. If the onlne statement only shows account number – try and find an old printed statement with the same account number and we can tie these together. Lender’s will require an explanation where credit card or overdraft accounts exceed authorised limit or where any payment is missed.
Identity Documents – this has become somewhat tedious and will depend on which state and which lender you chose. For some lenders identification can be done in a branch where as for others you may need to go to Aust Post ( fee applies so check with us first). If you are an Aussie expat then Australian consular staff are the only certification option – check the lender’s requirements closely. Always scan photo ID documents in colour and the image must be clear so it sometimes helps to enlarge x 2 the image. If your name has changed through marriage or divorce please provide a marriage certificate or other verification. In some cases a statutory declaration will suffice.
First Home Owner’s Grant and other government grants or concessions require you to complete additional forms and provide supporting documentation including identification. Please pay very close attention to what is specified in the application form.
Important Stages & Types of Approval
Indicative, Pre-Approval or In-principal
An Indicative or Pre-Approval or Homeseeker Loan is not a full approval. In some cases the lender has not even checked the acceptability of your employment or income. Also note that if your circumstances change, employment, your deposit, you enter into a car or personal loan etc, could jeopardise your loan approval. Likewise the interest rate and product quoted at pre-approval may very well change. Fixed rates are not guaranteed unless you have paid upfront for a rate-lock option.
These are normally issued once the lender has viewed the full application and supporting documents. These are usually subject to a suitable valuation report or other specified requirements. If you fail to provide the required information the loan process will not proceed from that point. The lender’s valuation is often the final hurdle, you do not have a loan until the valuation meets the minimum required or you can show sufficient funds to cover the shortfall. If the loan is over 80% LVR then the mortgage insurer (LMI) will need to approve unless the lender has delegated authority. Only when all stated conditions are met will the lender issue an unconditional approval – but keep in mind it is unconditional only as long as your circumstances do not change.
The cooling off period. This varies from state to state and is stipulated in your purchase contract. Extensions to the period can be negotiated and are not uncommon. Never waive your cooling off option without discussing with us and your solicitor. Lenders make no commitment and many often fail to provide an approval within the cooling off period (some lenders are currently taking 5 days just to arrange a valuation). If you have an in-principal approval in place prior to entering into the contract your chances are greatly improved. Once the cooling off period expires you must either proceed or withdraw from the deal – it would be very inadvisable to continue with a contract without finance approval – the legal implications are very serious and not just the loss of deposit.
Loan Documents and Settlement Process
The normal settlement period seems like weeks away, please do not become complacent by that. As some times lenders can be overloaded either with applications or system failure and this can result in extended delays – maybe weeks. At these times lenders can use any excuse and a single incorrect piece of information from you which if it were to happen at a critical stage can result in delayed settlement with the potential for penalty costs against you. Settlement can be delayed and lenders will rarely accept responsibility for any costs you incur as a result of these delays.
Please try ensure that the name/s appearing on the contract of sale is exactly the same as the name used for the applicants for the loan eg: William Smith is NOT the same as William & Mary Smith. When you receive your letter of offer check the details again for accuracy of names and addresses, loan type and interest charges. The mortgage documents will be issued on the basis of the offer, having documents re-issued can waste several days. If your loan should be Interest Only – this must be correct prior to settlement as it is not always a simple (cheap) matter to change after settlement.
Finally, the mortgage document is a contract and as such it advisable that you seek legal advice. You cannot modify (using initials) the contract and any changes will require a re-issue of documents with further delays so pay close attention and ensure you sign where required with appropriate witness signatures and return all documents that are not indicated as “clients copy”. The Mortgage Finance Association clearly state that mortgage brokers should not advise or offer interpretation of mortgage contracts as we are not qualified or indemnified to do so. We can assist you with clarification on interest rates and fees however we strongly advise you to seek professional legal advice on the terms of the mortgage contract.
The entire process will typically take 4 weeks, maybe 6 weeks or longer if you are overseas or otherwise unavailable at any time during the process. It is vitally important that once the application is approved and until settled you make no significant changes to your lifestyle, employment or other circumstances. Even a job promotion could theoretically cause an approval to be withdrawn – keep your broker informed at all times.