Your 7 Step Guide to Home Loan Process.
Follow these 7 steps to get a mortgage and become a new homeowner.
1. Figure out how much you can borrow (your borrowing capacity).
Before you begin the home buying and mortgage process, it is important to assess your financial situation and make sure you are financially ready to purchase a home. Based on your credit file, current income levels, existing liabilities etc, we can advise you how much you can borrow which is crucial to know what type of property you can afford. You can also refer to our range of calculators further aiding your dream home search knowing what is within the reach financially.
2. Select a lender and Apply for a Pre-approval.
Once you know your borrowing capacity, we suggest selecting a lender and obtain a pre-approval for the purchase of your property. Our Credit Proposal will show you a comparison and how much a lender is willing to lend you for a loan. Keep in mind that having a bank preapproval will make your offer look more attractive to home sellers and real estate agents since you are already supported by bank.
3. Inspecting properties and Find your Dream Home.
Now it is the time to start searching for your dream home. Look at any properties you think could be the right fit and don’t be afraid to ask your real estate agents for help with the home buying journey.
We strongly recommend that you inspect a few properties and do a thorough comparison that will assist you to understand the current price of the market and in turn help you when making an offer for property that you are keen to purchase. Before making an offer, do your research, drive around the area, check local shops, schools around. We can also help by organising a valuation report that would include information like indicative market value, specifications of the property, History etc. At this point, it is also very important that you request your real estate agent to forward a copy of the contracts to your solicitors or conveyancers so the contracts can be checked and property reviewed prior to making an offer.
4. Put in an offer and sign a contract.
Make an offer in writing to your real estate agent. At times, the agent might come back with a counteroffer, and you can continue the negotiation process until the final sale price has been agreed upon.
Note: Kindly consider below carefully prior to submitting your final offer and signing the contracts:
- Purchase price
- Cooling off period (5 to 10 business days for NSW purchases)
- Deposit amount once cooling off expires (5% or 10% for NSW purchases)
- Settlement period (usually 6 weeks for NSW contracts)
Once your offer has been accepted by the Vendor, you will be required to pay 0.25% of the Property Value (Example: $2,500 for a property worth $1 Million) and sign the contracts. By this time, your solicitor would have reviewed the contracts. If they don’t seem to have any issues with the contracts and you understand all the terms and conditions, then you can sign the contract and return to the agent and a copy will be signed by sellers as well. This is when you have formally exchanged the contracts.
As soon as the contracts are exchanged, it is recommended that you inform your broker so they are aware of the terms and can ensure a smooth process of your mortgage application.
5. Cooling Off Period.
A standard cooling off period of 5 days applies to all NSW contracts. You can seek an extension and can request a 10-day cooling off period through your solicitor. Note that there is NO Cooling Off Period if you plan to purchase a property at an auction so make sure you have spoken to your solicitor prior to making an offer at auction terms.
Why do you require a cooling off period:
- To satisfy bank pre-approval conditions and obtain an unconditional/formal loan approval (Your broker will organise a valuation through your selected lender and will conduct further checks on your application to issue out a final approval)
- To obtain a satisfactory Building and Pest inspection report (You appoint an inspector to carry out inspections on the property to provide you with an opinion on the property)
- Negotiate other terms of the contract (settlement date, deposit payable at the expiry of cooling off etc)
Once above is met and is satisfactory, you can pay the remaining balance of the deposit due on the property.
6. Receiving Formal Approval and Accepting your loan offer.
Once the formal loan approval is issued by the lender, Bank usually informs their solicitor to issue loan contracts and formal loan documents. We will go through these loan documents with you to ensure that you understand all the terms and conditions.
Most of the times, the offer letter is sent electronically and is consistent with bank original pre-approval terms in which case, you can sign these documents and have them returned to the lender. Just in case it require any changes, we will request those changes from the lender before you sign and accept the loan offer. Once your signed loan documents are returned to the lender, they will get checked by the lender and once the full process is completed, the lender will organise to inform the solicitor that they are ready to settle/fund your loan.
7. Settlement Day/Picking Up Keys.
The final step involved in this process is to prepare for the settlement. At this stage, you will have to organise any remaining funds payable by you to the seller. We will co-ordinate with your solicitor to ensure you don’t face any issues on the settlement day. This is an electronic process where your involvement is just to ensure the funds that you are supposed to contribute are ready and are transferred to your solicitor’s trust account a couple of days in advance. You are not required to attend the settlement; the process will be completed electronically between the respective solicitors. However, You are expected to conduct a final inspection of the property to ensure that it is in the same condition as when it was sold to you by the real estate agent.
Congratulations! Once settlement is completed, you will be the owner of your property and your home loan begins from this day onwards. Your first monthly repayment will be due one month after the settlement date.