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How to Apply for a Home Loan

by Remie Van Der Hulst

Home loans are probably the easiest way to begin your property ownership journey. However, there are many misconceptions about the loan application process that could make you susceptible to expensive mistakes. This extract discusses the home loan application process with the hope that you will have an easy time applying for a home loan.

Settle on a Property

A mistake buyers make is applying for a loan before establishing the amount of money they need. As a result, they either take a lower or higher loan. Therefore, you will end up buying a cheaper property or paying interest on money that you did not need. Avoid this by ensuring that you know the exact amount of money you need. Once you find a suitable property, negotiate with the seller and consult with your conveyancer to establish the extra costs of buying property. For example, you may need some cash to conduct a property inspection, pay your conveyancer, transfer the title or conduct a search. 

Check the Eligibility Criteria

Do you qualify for a mortgage? You need to meet these eligibility criteria: 

  • You should have a stable income to ensure you can repay the loan.
  • You must have a reasonable debt-to-income ratio. Ideally, you should not have a difficult time repaying your current loans or settling your expenditure after repaying the loan.
  • Some banks will check your age. Nonetheless, this should not disqualify you from getting the mortgage if you have a stable source of income.
  • The property you purchase should be in reasonable condition and within its market range. Remember, the bank will sell the property to recover its money if you default on the loan. 

Settle on a Specific Loan

Lenders have a wide array of loans to suit your situation. Therefore, assess the terms of these loans to establish which loan fits your financial situation. For example, a low doc loan is customised for people with a poor credit rating or those who cannot produce the required documents. Conversely, a variable rate mortgage changes its interest rate to match the rates set by the Reserve Bank. Supposing you intend to flip the property, you could take a shared equity loan that gives the lender a share of the property's appreciation. However, you will enjoy low-interest rates. 

When taking a home loan, settle on a property, check the eligibility criteria and settle on a specific loan. An experienced home loans broker will guide you through the ropes of the mortgage application process. Nevertheless, ensure your broker has the required accreditation and licences.