Buying a house is a life-changing and positive experience. It can also be both daunting and drawn out, especially if you are new to the process.
What are my responsibilities?
You must read and understand the mortgage documents. Don’t stress – many people need clarification here. In addition, providing all supporting documentation that the bank asks for the first time around saves you months of waiting.
Making sure the supporting documents you supply are up-to-date, as well as signing the mortgage documents (and returning them as soon as you’ve agreed to the terms), helps notify the vendor or real estate agent as to whether they need to allow access to the property for a valuation. Of course, much of this paperwork can be taken care of by a lender.
Lenders will ask for the relevant documents from you upfront, completing the application over the phone and contacting to the right lender for your situation.
It generally takes between 4-6 weeks from submitting your application to reaching settlement on your property, depending on the state in which you live in, but this has recently been extended due to bank turnaround time in the aftermath of the Covid-19 pandemic.
The First Step: the conditional approval or pre-approval process.
A pre-approval is an approval subject to a full valuation of the property you want to purchase.
You need to submit a completed mortgage application form to the bank/through your lender along with supporting documents:
- Acceptable forms of ID;
- Payslips and other financials such as your most recent group certificate or a Notice of Assessment if you’re self-employed;
- Evidence of savings and/or your deposit, usually in the form of a bank statement; and
- Statements for current debt facilities such as a credit card.
By applying through a mortgage broker instead, you can save yourself a lot of time and hassle – a good mortgage broker will assess your entire situation and organise your application with the right lender, prepare your application on your behalf and mitigate the risks in your application. Brokers have strong relationships with the key decision-makers and understand how to present your application.
Generally speaking, a longer approval time will apply when:
- Borrowing more than 80% of the property value, which is seen as a higher risk;
- Borrowing more than $2 million;
- Borrowing with a guarantor;
- Unusual employment such as contract work or if you’ve just started a new job;
- Buying a unique property such as a house located in a rural or regional location;
- Borrowing through a trust, company or a self-managed superannuation fund (SMSF); or
- You’re a non-resident who is either living overseas or living in Australia on a temporary working visa.
These situations are considered “outside the box” and require more work from the credit team to ensure that you meet their lending policy. If no other documents are required by the bank and you meet the lending criteria, you’ll be given a pre-approval.
The Second Step: pre-approval
Essentially, this step can take as long as you need it to, bearing in mind that your pre-approval will be valid for up to 3-6 months.
Already found a property?
Let your bank know of the address so they can look the property up and decide whether it meets their lending criteria.
The Third Step: valuation
The time valuation takes depends on the nature of:
- the property; and
- your application.
If a full valuation is required, it could take as long as 5-7 business days depending on how quickly the vendor or real estate agent allow access into the property.
It also comes down to the availability of the valuer.
The Fourth Step: formal approval
Once a valuation has been undertaken and you’ve been formally approved, you can sign the Contract of Sale with help from your conveyancer.
It’s at this stage you should negotiate the settlement date, which is typically set for four weeks after signing the Contract of Sale.
The time between getting formal approval and signing the Contract of Sale will come down to how organised you and the vendor are. This is where a broker is, again, highly recommended.
Typically, the vendor’s conveyancer will send the Contract of Sale to your conveyancer and you’ll then organise a date to have a meeting to discuss the terms. Consider 1-2 days so you’re not rushing into the sale.
In the meantime, the bank will be preparing the loan offer documents for you to sign. This can take anywhere between 2-7 days, and during this time, the lender may ask for updated documents or further documents; so be prepared. Remember, it’s important to sign and return the loan contract as soon as possible, if only to speed up a timely process.
If you have any questions or need clarification on any of the points above, don’t hesitate to call or email us on firstname.lastname@example.org to speak to an experienced member of our finance team. House buying is never something to be taken lightly, and it helps to have the right professionals at your side.