A Guide to Home Loan Process

The mortgage process can be intimidating and confusing for first-time borrowers. Many borrowers don’t realise that the mortgage process begins even before they apply for a home loan. In order to help first time or seasoned borrowers get familiar with the home loan process, we’ll discuss the most important aspects of the loan process.

pre approval


Saving a Deposit

Before applying for a loan, a borrower should be prepared to handle the finances. The most important concern for a borrower is the deposit. A borrower should have at least 5 per cent deposit as it meets the requirements of most lenders for genuine savings. The more a borrower can save for a deposit, the better it is as it will allow a borrower to get a good loan deal.

If a borrower saves up to 20 per cent deposit, they’ll be in an excellent position as they won’t have to pay LMI (Lenders Mortgage Insurance). LMI is a fee that is charged when an amount greater than 80 per cent of the home’s value is borrowed.



Getting a pre-approval on a home loan increases the chances of a borrower to get a mortgage as it means that the bank has pre-assessed the mortgage. No money is charged for this approval and it stays valid for three to six months.

Bank’s pre-approval also provides an indication to the borrower about how much they can afford to borrow so they don’t spend time looking for properties that are beyond their reach. However, all pre-approvals aren’t reliable. When a borrower’s pre-approval is reliable, the bank won’t have to assess the complete loan application so the closing period on the home loan will be shorter.


Calculate Loan Repayments

Choosing a Home

Whether a borrower is buying an investment property or a home to live in, it is important that they thoroughly research and evaluate their options before they decide to put their dollars on the line. There are several listing websites that offer comprehensive listings and valuable market insights. Even if the property is being purchased to live in, a borrower should still determine its sellability. If the property is to be sold in a short time, will there be any buyers who are willing to purchase it? This not only reduces the risks for the borrower but also helps them get an approval from the bank.


Home Loan Application

After the borrower has acquired a pre-approval from the bank and has chosen their property, the mortgage lenders will assess the property to determine its value. If the application of the borrower is low risk, they may not need a valuation.

Once the mortgage lenders have everything required for the application and are willing to lend, the borrower is formally approved. This is called unconditional approval. If more than 80 per cent LVR (Loan-to-Value Ratio) is being borrowed, a borrower may also require LMI approval. Next, a loan contract will be given to the borrower to sign. After the borrower has signed and given the contract back to the lender, they have reached the home loan process’s final stage, which is the settlement.


How Is Borrowing Power Checked?

Different calculations and combinations are used by banks to check the borrowing power of an applicant. The borrower’s expenses, income and personal situation are generally taken into account by the bank to determine their borrowing power.


Check the Borrowing Power

A loan applicant should check their borrowing power to determine the amount they can borrow. The borrowing capacity calculator can be used for this purpose. This calculator determines the borrowing power using the same method that is used by the banks to check the borrowing capacity. However, the borrowing capacity calculator should only be considered a guide as there are some items like Medicare and tax rates, debt repayments and living expenses that are not the same with all lenders and therefore, results can differ.


Documents Required

The mortgage process goes smoothly when a borrower prepares the below-listed documents in advance:

Account Statements:

A borrower must provide their account statements and histories of transactions that contain account balance, account numbers and limit.


Income documents
  • Payslips provide proof of income. A borrower must provide at least two recent payslips for the loan application in case of PAYG.
  • In the case of self-employed, two years tax returns and financials are required


Identity Documents

A borrower must provide Identify documents that contain the document number, issue date etc. Some of these documents are:

  • Drivers Licence
  • Passport ( If overseas passport please include the visa approval letter as well).
  • Medicare card
  • Proof of ID card
  • Citizenship certificate.


Statutory Declaration

If the name of the borrower has changed because of marriage or divorce, they must provide a statutory declaration or marriage certificate.


Liabilities and Expenses Documents

Statements for credits, car loans and other types of mortgages must also be provided to the lender.


After Settlement

When the borrower becomes the official owner of the home it is called the settlement. After the settlement, the borrower will need to make repayments on time for the home loan and review their interest rate. A mortgage broker can help a borrower review their home loan to ensure timely repayments and determine if they have had any problems.



The home loan is mostly refinanced to reduce the rate of interest. However, a borrower can also refinance the home loan to renovate their property, access equity, switch loan packages and access add-ons or extra features. Even if the borrower is not on a fixed rate, they can still consider refinancing once three or four years have passed since settlement.

Refinancing is like applying for a new loan; therefore, the borrower will need to provide the same documents. The bank will revalue their property and the old mortgage will be paid off using the new mortgage. However, the borrower will have to consider the ongoing and upfront costs of their existing mortgage before they switch.




Who should be the Owner of the Property?

If the borrowers are applying for a loan as a couple, they’ll have to decide how the property’s ownership will be split. There are three types of ownership: sole owners, joints tenants and tenants in common.

From Where Can We Get Help?

If the borrower plans to get a home loan, we can help them. At Josh Financial Services, we are committed to helping people find the right mortgage. Call us today at 1300 537 000 or book a free consultation to get a complete understanding of the home loan process from experts.

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