Mortgage Process

 

Every person seeking a home loan has to undergo a number of steps from start to settlement. Understanding what happens in each step helps you prepare for the process.

 

Step 1: Preparation and Interview

Step 2: Completion of a Loan Application

Step 3: Lender Assessing Application

Step 4: Obtaining a decision – Conditional Approval

Step 5: Valuation of Security being provided

Step 6: Lenders Mortgage Insurance

Step 7: Formal Approval

Step 8: Mortgage Documentation

Step 9: Insurance Requirements

Step 10: Settlement

 

Step 1 - Preparation and Interview

We will meet the you at a place which is the most convenient to you. This could be after hours in your residence; at your work site during your lunch break or even at a cafe! During the interview process, we will discuss the home loans (with the necessary features and benefits that you require) that suit your situation. We will go through and provide you with numerous options that are available and then go through each one with you to see which is the most appropriate that will suit your needs and wants. Once you are happy with your selection of the loan product, the loan process will commence.

 

Step 2 - Completion of a Loan Application

Together we will now complete the lenders application that you have chosen and will go through what is required in relation to all the necessary documentation which is to be included so they can lodge your home loan application. We will also go through your income situation to see if you will be able to service the loan that you are applying for. It would depend on your situation as to what documents would be required.

Upon receiving all the relevant documentation the we will submit it to the chosen lender.

 

Step 3 - Lender Assessing Application

The lender will assess your application to determine whether you meet their serviceability and credit requirements. This process includes confirmation of your income, employment and a credit reference check. Your supporting documentation is also assessed at this time.

If the credit assessor requires any additional information they will send through a request to us and we will contact you to provide the information required.

 

Step 4 - Obtaining a decision – Conditional Approval

We will receive a communication from the lender in the form of a conditional approval on your behalf. The lender will also outline any matters that need to be addressed before they can issue an unconditional approval. We will advise you upon receipt of this communication.  Just remember, a Conditional Approval does not mean you will get the loan, there are still a few hoops to jump through.

 

Step 5 - Valuation of Security being provided

The most common condition of an approval is valuation of the security being provided. The lender will order the valuation and this could take up to 3-4 days to complete – it will all depend if the valuer can obtain access to the security property being provided. This is a very important step in the mortgage process and co-operation is utmost to ensure that the loan application is not delayed due to the fact that the valuer cannot access the property security. If there is an application fee applicable the cost of the valuation is usually included in this fee.

 

Step 6 - Lender's Mortgage Insurance (LMI)

This step will only be necessary if you have less than 20% deposit or insufficient equity in an existing property.

What is Lenders Mortgage Insurance???

Lenders Mortgage Insurance (LMI) is one of the most popular ways to achieve the dream of home ownership sooner for borrowers that do not have a large deposit.

Many lending institutions require borrowers to contribute a 20% deposit before they will agree to provide a loan.  This is largely to protect against the risk associated with providing the borrower with the loan in the event that they default.

By using LMI, lenders are able to pass on this risk to a mortgage insurer, which in turn enables them to offer the same loan amount but with less of a deposit.

LMI should not be mistaken for Mortgage Protection Insurance, which covers your mortgage in the event of death, sickness, unemployment or disability. LMI protects lenders against a loss should a borrower default on their home loan. If the security property is required to be sold as a result of the default, the net proceeds of the sale may not always cover the full balance outstanding on the loan.

Should this be the case, the lender is entitled to make an insurance claim to the Mortgage Insurer for the reimbursement of any shortfall, calculated in accordance with the terms of the insurance policy. It is a once off premium and in a lot of cases can be capitalised with the loan.

 

Step 7: Formal Approval

When a home loan application is formally approved (some lenders use the terminology of unconditionally approved) it means that all conditions and criteria required to assess a loan application have been supplied, assessed and approved. It is only when a home loan application is formally approved that the borrower can feel comfortable that they can obtain a home loan. If you are buying a property it is advisable not to exchange contracts until such time that your loan has been formally approved. This will be communicated to us and we will notify you immediately of the decision. A formal Letter of Offer will then be issued by the lender. Mortgage documents will be prepared and will be sent directly to the applicant/s or the applicant/s solicitor if that was  requested in the loan application.

 

Step 8: Mortgage Documentation

Now that the formal offer has been provided, mortgage documentation is prepared by the lender. These include the letter of offer; transfer document; terms and conditions of the loan you have chosen and any other documentation that is pertinent to the lenders own guidelines. If a purchase is involved then it is highly recommended that you should sit down with your solicitor/conveyancer to go through the paperwork and it will be the solicitor/conveyancer who will then liaise with the lender to schedule a settlement date. If it is for a refinance or a ‘top up’ then it is recommended you sit down and go through these documents with us.

 

Step 9: Insurance Requirements

With the new liabilities that come with owning property, it is important to consider or review your insurance requirements to ensure you are appropropriately covered. There are main four types of insurance you should condsider:

• Home insurance

• Contents insurance

• Life insurance

• Income protection

You may need to start your insurance cover prior to settlement.  We will talk to you about these requirements at your interview or you can contact us anytime to discuss your requirements.

 

Step 10: Settlement

After the mortgage documents are signed, witnessed and sent back to the lender, then settlement is arranged via your solicitor/conveyancer or if there is not a necessity for a solicitor/conveyance then we will be involved to ensure settlement is completed. The first repayment on your loan will usually be required one month after the settlement date.