So you want to buy a home, awesome but how do you get a loan?
Is it easy? You just walk up to the bank and they give you the money?
Well today, we're going to take you through the step-by-step process to getting a home loan.
All right so Step 1, chat to a mortgage broker.
Now, this might sound a bit self-serving. So Nathan, why bother talking to a mortgage broker?
Why not go to your bank, I've got my little Dollarmites account.
I'll go to CBA, that makes sense, right?
Going through a mortgage broker not only gives you choice because you get access to a plethora of different lenders,
they'll also help you navigate and make sure that you're not applying with the bank
that you might not be suitable for, particularly, with lending criteria is constantly changing.
You may be in a short-term employment and the bank you're applying for might not be keen on it.
So, going through an mortgage broker will increase your chances of success
and give you far more choice. - I kind of put it this way.
In other words, by going through a broker, you can sit in front of one person
and you get access to 30 different banks and lender.
Whereas if you go to your CBA branch manager, I'm sure they're really nice people
but they've only got one lender and they're not going to tell you if there's a better deal down the road.
And like Nathan said, there's different policies, there's different interest rates
and there's actually, different lenders mortgage insurance cost.
Now, I've got another video on that, so if you want to check out more details, make sure you click it below.
Step #2, it's time to prepare for your application. So Jayden, practically, what does this look like?
Yeah, so this is when your broker or your bank will ask you for the things like your pay slips,
your ID documents, maybe some bank statements, to start that home loan process rolling.
They're going to need to show the bankers,
so the credit team can go through your documents and make sure that you can afford the loan.
So this time, it can take a couple of days,
there's a bit of preparation and then basically at the back end,
your bank or broker will come back and say, "We recommend this product for you to apply for."
Step #3, the paperwork that's now being provided goes to the bank and you get a pre-approval.
So Jayden, tell me more about what a pre-approval is.
Yeah. So a pre-approval is just that.
So it's an approval that bank gives to you that's usually subject to a bunch of other conditions
and terms because at this point, you haven't actually found your property yet.
So there's different types of pre-approvals depending on the bank.
This is where people can get caught out.
There's a lot of banks out there that all say they can do a 30-minute over-the-counter approval
or something over the phone, where it's an instant pre-approval and unfortunately, they're not real.
Those pre-approvals are basically just a credit report that checks that you're okay
and you don't have any defaults but they don't look at your income,
like Nathan said before, they don't check, you know, if you get paid overtime or meal allowances
or different sort of things, that then could mean the bank can decline you after you're being pre-approved.
So again, it's a good step to get, you definitely want to get a pre-approval.
It's definitely the next step in the process but just know what type of approval it is.
You can ask your bank or broker, if it's been with their credit team in their bank,
if the lenders mortgage insurance approved it
and what other conditions your approval might be subject to before you get to the formal approval, which then saves time.
So Step #4, you've got your pre-approval, you start looking around, you find the right property,
you've successfully negotiated the purchase, what happened to you?
So I give the broker the contract to sell, I don't know what happens after that.
Yeah, so pretty much from here, the broker or the bank will arrange a property valuation.
This is where the bank will send out, basically, an independent valuer to go look at the property.
They'll make sure the process that your paying is broadly what the market is but it's only forvbank purposes.
So it's not really for your use anyway. It's just to make sure if something goes wrong,
the bank can sell the property for what you brought it for.
Step #5, the valuations is now back, the bank received it, what happens from here?
Yeah, you're approved.
Almost.
So at this point, all those documents go back, your pay slips,
all your information goes back to the banks credit team with the valuation,
they'll double-check everything for the last time and then they'll issue the formal approval.
Now sometimes, this is called an unconditional approval but good thing is that's it.
That means you're approved. It's not subject to any further conditions.
You just need to go through the next steps in the process to do it.
So if you've got a finance clause at this point, you can tell the real estate agent or your solicitor
that you're finance approved and you can move forward and get ready to move with that place.
Step #6, the loan is now approved, loan contracts are ready to sign.
What does that look like?
Yeah, so loan contracts can be scary. They look like a big wad of papers.
It's crazy but it's part of the process.
The banks have a lot of standard terms and conditions in there.
It's nothing to really worry about but this really just formalizes your home loan approval.
So you sit down with your broker or your banker, you sign the loan contracts that have the interest rates,
your payment details, your loan amount you're getting even, any fees and charges
the banks are going to charge you now and into the future
and you just wait for three days and sign them. It's pretty easy. It's fine.
You're almost on the home stretch, so from this point forward,
it's kind of up to the bank and your solicitor is to book in settlement.
Step #7, settlements being booked in and today, you're going to get the keys.
Settlement day, what does that entail?
Yes, so it's settlement day, it's quite exciting.
So again, there's nothing else for you to do until it's settled.
So in the background, the bank and the solicitor or if you're refinancing a home,
the bank and the bank will talk and they'll basically exchange money.
They still actually exchange paper checks which is a bit crazy but they do that.
They'll sort that out, money are exchange hands and in about two or three o'clock in the afternoon,
you'll get a phone call from your broker or your banker to say, "Hey, congrats! It's settled."
You can go and get the keys, so that's it. You're home. Aren't you?
Step #8, you've settled, you've moved in.
It's two weeks after the settlement day, what should you be checking?
Yes, so you probably not thinking about the home loan process right now but you should be.
So you've got to remember that after settlement,
the bank will usually take out your first direct debit or your First Home Loan repayment
about two to four weeks after settlement. So it depends.
If you jump forward out of your payment, it will roughly come out two weeks after.
If you've done monthly repayments, it'll come out, obviously about 30 days after settlement
but it's at this point, two weeks after settlement,
that you want to be checking that your offset account is set up correctly.
If you've got an offset account, that you can set a banking online, so you can see the account
and that your payment is all set up and all good to go because quite often,
the banks kind of forget this and they make mistakes
and you don't want to fall behind in your payments before you've even make the first one.
And the last step, reviewing your loan regularly.
So Jayden, should I be reviewing it after 12 months? 24 months?
What do you recommend?
Yes, so unfortunately here, you know throughout the home loan process,
it's not something that stops after settlement. It's ongoing.
These days, the banks do offer much better deals to new customers, which sucks.
You can be a loyal customer, you could have been there,
I could have my little Dollarmites kids with CBA for years and years
but they just want to see and winning new customers and not really too worried about the old ones.
So that's where working with your mortgage broker and doing an annual review is great.
At Hunter Galloway, we help out with that, with all of our customers.
So if you need any help reviewing your loan
or if you just want to know some questions on the home loan process,
let us know, leave a comment below or hit us up at HunterGalloway.com.au.