Home Loan Application
Who Can Apply for Home Loans
Anyone who is able to purchase a house (ie: is over 18 years old) will be able to apply for home loans in Australia. If you are an Australian citizen or permanent resident then you will be able to apply for any home loan product on the market.
If, however, you are not an Australian citizen or permanent resident then you may still be able to apply for a non resident home loan. Non residents or foreigners can purchase particular types of property in Australia provided that it adheres to the requirements set out by the Foreign Investment Review Board (FIRB). A much smaller number of lenders offer non-resident home loans and this type of loan generally has a few restrictions associated with it.
You may be able to do the initial part of applying for a home loan online with some lenders, but because it is such a big decision you will eventually need to sit down with a representative from the lender to finialize the loan details. It has become increasing popular now to get a mortgage broker to apply for a home loan on your behalf. In order to do this you will simply need to meet with them, provide all of your ducumentation to them and then sign the contracts once you have accepted their loan recommendations.
Important Home Loan Information
There is such a large difference between the home loan products and even the loan features from one lender to another that it is important that you do your research thoroughly before you decide which one is right for you. Before making your final decision you should look into the following points to see if any of them are relevant to your situation. After doing this it will be easier to decide which lender is right for you and also there will be a better chance of your home loan application being successful.
- All home loan lenders will check through your credit history report before processing your home loan application. For this reason you should get a copy of your own credit history to see if there is anything bad on there. Sometimes you may find something that is an error and it is best to get this removed from the report before applying for the loan. For any other bad marks on your credit history have a detailed response ready for the lender explaing why these bad marks are on the report.
- It is very important in your home loan application to demonstrate that you have steady, full time employment. Home loan lenders want to see that you can keep down a job and are not likely to become unemployed anytime soon.
- When comparing home loans you should not just look at the advertised interest rate that is quoted by the lender. It is more appropriate to look at the AAPR comparision rate because it takes into account all of the ongoing fees and charges as well as many other important loan factors.
- The actual interest rate on the home loan should not necessarily be the deciding factor. Sometimes the presence of features like free additional payments, unlimited redraw and 100% offset account are more important that the actual interest rate. This is because if you use these features wisely you can actually save a lot more money than you have to pay on a slightly higher interest rate.
- If you can qualify for a professional package then the lender will generally offer you a discount off the standard variable home loan interest rate. The general criteria to be eligible for this discount differs from lender to lender, but it generally revolves around a minimum loan amount and either working in certain professions or a minimum salary.
- Utilizing a mortgage offset account is one of the best ways for financially savvy people to save literally thousands of dollars off their home loan. Be careful when comparing home loans, though, because you want loans with a 100% mortgage offset account and the partial offset account, which is the much poorer cousin.
- A redraw facility is a great feature but make sure that you check all of the terms and conditions on the loan contract. You don't want to be charged a hefty fee everytime that you use this facility and preferrably you should have access to this extra money for free.
- Particularly with first time borrowers home loan lenders will be looking for evidence of a good savings history. The best way to demonstrate this is to show who you saved up the deposit for the home over a period of time. If you save up a 20% deposit or possibly even more it will not only save you lots in interest repayments but it will also almost guarantee your home loan application is successful.
- Always ensure that your house is insured at all times and that the value it is insured for is enough to rebuild it if necessary. Also remember that it is your responsibility to have the house insured as soon as your sign the contract of sale, even though you may not settle on the property for a few months.
Questions About Home Loan Applications
In order to compare home loan lenders you need to ask then as many questions as you can think of. This way you will not only understand the whole loan process much better but it will also make it easier to decide which one is right for your needs. So when you are applying for a home loan in Australia you always ensure that you get detailed answers to the following questions.
- What is the AAPR interest rate (which is the rate that takes into account all other fees and charges)?
- Is it possible to qualify for a lower interest rate on the home loan?
- Can you choose the term of the loan (ie: 25 or 30 years)?
- Is the interest on the home loan calculated daily on the unpaid balance?
- Can you make additional repayments at any time in order to pay off the home loan sooner?
- When making additional repayments is there a fee for doing this?
- What are the fees for paying off the home loan sonner than anticipated?
- For fixed interest rate loans what home loan product oes the loan default back to when the fixed period is over?
- For variable interest rate loans how much notice will you get before the rate changes?
- If you refinance the home loan is there a deferred establishment fee that you have to pay?
- Is there an option to choose weekly, fortnightly or monthly repayments?
- Does the loan have a redraw facility?
- Is there a fee for redrawing money back out of the account?
- When redrawing money from the account is there a minimum amount that you have to redraw?
- What are the other fees associated with the loan, including ongoing, transaction and bank fees?
- What documents will the lender need to approve the home loan?
- Can you get the home pre-approved before purchasing a house?
- How long does home loan pre approval last?
- What is the maximum loan amount that you can borrow?
- How long until the home loan application is approved?
- On what date of the month will my payments be due?
Documents Required for a Home Loan
There are a number of documents that you will be required to produce in order to get a home loan in Australia. The information in these documents will help the lender to ascertain whether or not lending you money would be a high or low risk proposition. So in order to increase the chance of your home loan application being successful and also to ensure that there is no delay in the approval process it is important that you provide as much information as you can. The following list what you will be asked to produce for the majority of home loan types, with the exception of course of low doc and no doc home loans.
- Documents for your work or place of employment stating how long you have been working there, whether you are employed full time and how much you earn. This may also include payslips from your employer or your last few tax returns.
- If you own an investment property then you will need to show documents outlining how much rent you are receiving.
- Bank statements from the last 3-12 months will prove to the lender that you have a good savings history.
- Documentary proof of any other assets that you own, such as another property, land, car, etc.
- Details of any liabilities that you have, such as credit cards, store cards, personal, car or student loans.
- Lenders are require detailed information about all of major living expenses. This will incude such things as insurances, repayments on other loans, child care costs, monthly living expenses, etc.
- To have the home loan application approved you will have to do a 100 point ID check in order to prove your identity. This will include showing such things as a driver's licence, birth certificate, medicare card, household bill with your current address on it and/or ATM card.
If you are not sure about the meaning of some of the terms or abbreviations used by lenders then you can check out the home loan definitions page, which has a detailed explaination about some of the more confusing aspects of getting a home loan.
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