Frequently asked questions
Q: What documentation do I need to apply for a loan?
A: To apply for a home loan you should fill out a mortgage application form that will ask you for details about your income, credit and savings. Your mortgage broker will have these. The application helps determine if you qualify for a loan and measures your debt ratio, an important part of working out how much of a house you can afford.
The type of documents you need for your application include:
- Personal identification: e.g., passport, drivers licence, birth certificate.
- Property information: e.g., Contract of Sale.
- Financial information: e.g., cheque account and savings statements.
- Liabilities: e.g., loan and credit card statements.
- Income: e.g., group certificate, pay slips and tax return.
- Expenses: e.g., rent payments, electricity bills.
Q: What happens after I have filled out the application?
A: We will submit your application for assessment and then notify you as soon as we hear back from the lender. When your loan is approved, you will receive a letter of offer, which is a legal contract outlining the terms and conditions of your loan. Once the exchange of contracts is complete, your loan will be drawn down, paying out the previous owner and any taxes and fees. Loan repayments begin on the chosen repayment date after settlement, according to whether you have selected weekly or monthly repayments.
Q: How much deposit do I need to buy my first home?
A: This varies according to the type of loan you are taking out, the amount you are borrowing and the lenders policy, but in general you should aim to save a deposit of between 10 to 20 per cent of the purchase price. The more deposit you have saved, the less you'll need to borrow, which means you make lower repayments and pay less interest.
Q: What are deposit bonds?
A: Deposit Bonds act as a substitute for the cash deposit between signing a contract and settlement of a property; they are issued by insurance companies for a modest fee. At settlement the purchaser is required to pay the full purchase price including the deposit. Contact us to determine if a Deposit Bond will be required for your scenario and we can advise the costs involved.
Q: How much can I borrow?
A: Depends on factors like the size of your income and deposit, but many lenders require a maximum of 90 per cent Loan-to-Valuation Ratio (LVR), which means that you can borrow up to 90 per cent of the purchase price, but you will have to supply evidence of your ability to save at least 3 to 5 per cent of the value of the property ('genuine savings').
Q: What about the First Home Owners Grant?
A: This government assistance program provides you with a one-off payment to use towards the deposit for your first home. The grant amount varies from state to state, so check with your mortgage broker. We can help you apply for the grant as well as arrange for prompt payment.
Q: Does my credit rating affect my borrowing ability?
A: Your credit will be checked as part of the loan process, so you may find it harder to secure a loan if you haven't paid your bills, skipped payments or exceeded credit card limits. Contact your mortgage broker for assistance in accessing your credit history, as you might be able to improve your rating before you apply for a loan.
Q: How do I know which type of mortgage is best for me?
A: There are a number of factors to consider, including your current financial situation, your goals and how long you intend to keep your house. Your mortgage broker can work with you to help evaluate your choices and find a solution that meets your needs both now and in the future.
