Find out what’s involved in taking out a loan, from start to finish. How does the process work?
1. Engage a Finance Broker
A good finance broker will get to know you, your financial circumstances and your long term goals. The better your broker understands your overall situation the better they can match the right products with you. There are so many more lenders, products and options available these days and with more choice comes more complexity. A good finance broker will navigate you through the process to act in your best interest and not the banks. In the simplest terms, a mortgage broker makes it easy – saving you time and, hopefully saving you a lot of money.
2. Arrange a pre-approved loan
If you haven’t started your property search, or you are still looking, a pre-qualified loan can be useful. It gives you a clear picture of what your spending limits are and gives you peace of mind that if you find a property you’re really interested in you can move quickly to make an offer. This may put you in a stronger negotiating position than other potential buyers who don’t have pre-qualification. A mortgage broker can take care of the paperwork to lodge a loan application. A good pre-approval will basically go through the full application process with the only missing information being the specific property details.
3. Begin your property search
Make sure you do plenty of homework when you’re on the hunt for a new property. Research property prices in the area, potential capital growth and existing and planned infrastructure, such as roads, public transport, schools and shops. Once you have found a property which suits your requirements and ticks your boxes you are ready to make an offer.
4. Make an offer and sign a Contract of Sale
Your agreement with the vendor only becomes a legal commitment when a Contract of Sale (Offer & Acceptance in WA) has been signed by both parties. This contract will confirm the selling price as well as any terms and conditions. Your commitment will usually be subject to finance approval as well as any other conditions negotiated between buyer and seller.
Note: Even if you have a pre-approved loan, your lender will still need to complete a valuation of the property you have chosen and run through their final checks before issuing a formal approval - this may involve requesting updated documents such as pay slips and bank statements at that time.
5. Appoint a settlement agent / conveyancer
You will need a settlement agent or conveyancer to check the legalities of the Contract of Sale. Your conveyancer will also ensure all rates and taxes are paid, check land use or building approvals for the property and order any relevant searches.
On settlement day, the settlement agent will check the correct amount of money has been transferred from your lender to the seller and all fees – such as Stamp Duty are paid, so you can take legal ownership of the property.
6. Pay a deposit
A deposit is required once a Contract of Sale has been signed by both parties. You won’t yet have access to your home loan, so your deposit will need to come from your own cash savings.
7. Formal Approval & Settlement
After the lender has completed the final checks and are satisfied with all of the information provided they will issue a formal approval which will make the contract binding. Loan and mortgage documents are then signed and returned in order to proceed to settlement.