Applying for a home loan becomes fairly simple when you break it down into a few steps:
Find a suitable home loan and lender.
Collect your identification and income documents.
Submit your application.
But typically, there are pre-steps and then there are steps within the steps. So let's break it down:
1. Before you apply
You won't be able to apply for a home loan without having a property to attach the loan to. That's because your lender needs to value the property you're buying first.
However, it's helpful to know how much you can borrow before you start looking at multi-million dollar mansions.
The quickest and easiest way to get an idea of how much you can borrow is to use our borrowing power calculator. It's an estimate based on your income and expenses, and although it isn't 100% accurate, it can be a helpful guide.
Pre-approval means you submit a short, initial application and the lender offers a quick assessment of how much they might be willing to lend you. It's not binding, but it means you have a much clearer idea of how much you can borrow.
And you've started the home loan application process!
If you're buying at auction, pre-approval can give you an advantage over another bidder who doesn't have it.
You do not need to stick with this lender when it comes to applying for your home loan.
2. Finding the right home loan to apply for
Once you've found the property you want to buy and the vendor has accepted your offer or your bid, you will pay the deposit.
Now, you can apply for your home loan. Even if you have pre-approval, you need to complete a full application to be approved fully. This can be with a different lender to the one which offered you pre-approval.
Finder survey: How do Australians prefer to apply for their home loan?
Response
In a branch
50.9%
Online
35.61%
Other
6.29%
Over the phone
4.77%
Via an app
2.43%
Source: Finder survey by Pure Profile of 1112 Australians, December 2023
3. Collect your home loan application documents
When applying for a home loan, you need to gather documents or other evidence of your income, debts and proof of identity.
(You may have already supplied some of these if you have pre-approval.)
Identity documents. You need documents to establish your identity, including a birth certificate, passport or driver's licence.
Proof of income. Your lender may be able to process this via your online banking platform, but if not, you will need to provide payslips as proof of your income. If you're self-employed, you won't have payslips and will need to provide a recent tax assessment or a business activity statement (BAS).
Debts, assets, liabilities. Bank and credit card statements can be used to establish your savings and debts. Be sure to include statements from every debt, including personal loans and existing mortgages.
Details about the property. You need the address of the property you're buying and a contract of sale signed by you and the seller. The lender may also require a certificate of currency, a document that proves you have an insurance policy covering the property.
The more complex your financial situation, the more supporting documents you will need. For example, if you're applying for a construction loan, you'll need a copy of the building contract. If you're a first home buyer with a guarantor, then the lender requires details about your guarantor's property.
Finding a conveyancer
When you're in the process of buying a property, you need to engage a conveyancer. This is a type of legal specialist who handles property titles and all the legal aspects of a property purchase.
It's a good idea to engage a conveyancer when you're applying for a loan or even beforehand. A conveyancer should look over the contract of sale and the mortgage contract. They will also represent you at settlement.
4. Completing the mortgage application
Here we go, the moment we've been waiting for!
Now, every lender has its own application process so we can't be overly specific.
If you're using a mortgage broker, the broker will help with the application or even do it for you.
Most applications can be completed online, but some may require you to go into a branch (or you may even prefer to do it that way).
Fill everything out and make sure to put in all the correct details. You will need to provide things like:
Your personal information.
Your income.
Your monthly expenses, typically broken down into categories such as health, food and groceries, education, transportation and entertainment.
Any other debts.
The details of the property you are buying.
Your lender will examine your spending and compare it to the information contained in your income documents and bank statements.
Verification and credit check
Once the lender has your application, it will check the documents and verify your identity. The lender will also perform a credit check.
A seamless application process
"I applied for my home loan through a mortgage broker who was recommended to me by my sister, which made the whole home loan process much simpler for me. I sent him all the relevant documents like payslips and bank statements, and we talked through what my budget might be. He arranged pre-approval on my behalf, which was great because it helped me know what houses I could realistically look at.
"Once I'd found my house and paid the deposit, my broker sent me a table of lenders to choose from. The application process from there was really simple, as all the information had been provided for my pre-approval already. To verify my identity I just had to go online to a bank portal. The only time I had to go into a branch was to open my offset account.
"The time between application and approval was only a week."
Harrison Khannah
Software Engineer
Tips for a stronger loan application
Now that you have a better understanding of the application process, let's explore the steps you can take to make your application stronger.
1. Fill out the application precisely and completely: If you start estimating or making guesses and the lender picks up on it, the process will take much longer while they come back to you for clarification.
2. Trim your spending: Lenders will scrutinise your bank statements and if you're spending too much money they'll see you as a risk. Consider if you can cut out any regular purchases, big or small, particularly in the 6 months before you apply. You should even watch out for things like eating out and subscription services.
3. Pay off other debts: If you've got a car loan and/or a credit card, you might want to consider paying it off. Multiple debts raises a red flag to lenders.
4. Offer a higher deposit: Not an option for everyone, but the more deposit you can offer the better chance of approval. This could mean saving up more money, or opting for a cheaper home.
5. Check your credit score: Lenders will check your credit score to make sure you're a trustworthy borrower. Knowing your credit score will not only help by warning you if you're unlikely to be approved, but you can read your credit report to find out exactly if there's anything you need to fix. You can check your credit score for free through Finder.
6. Pick the right property: Some lenders have criteria on properties they're willing to lend for. That might be down to the property size, property type or the location of the property. This is because the property acts as security, meaning the lender can sell it and recoup its loss if you can't repay your loan, and it wants to know it will be easy to do that.
Example: Manit has trouble getting a loan approved
Manit has just signed a contract to buy a two-bedroom apartment in an inner-city Melbourne suburb. Her credit score is excellent and she has used a borrowing capacity calculator that suggests she can comfortably afford the $500,000 property with her 20% deposit.
But when applying for a home loan, Manit's lender informs her there's a problem. Due to the high number of existing apartments in the postcode Manit is buying in, the lender feels lending to her is riskier. The lender is willing to provide her 70% of the property's value, meaning she needs a 30% deposit. This is more than Manit can afford. Luckily, Manit hasn't completed the application and is able to cancel it and find another lender.
This time, she calls the lender first and asks if there are any lending restrictions on apartments in her postcode. When she learns there are no issues, Manit completes an online application with the new lender.
More home loan application tips and help
If you think the whole process of finding and applying for a home loan is simply too much effort, or even if you're still a bit confused and need some help, talk to a mortgage broker. A mortgage broker is a qualified professional who can not only help you find a home loan but also help you through the entire home loan application process to the approval stage.
Home loan processing and approval varies depending on the lender, the property and your particular circumstances. If you're purchasing a house (not a unit) with a 20% deposit and a stable income, your approval could take a few days. More complex applications, with smaller deposits or unusual properties (small units or rural properties, for example) can take longer.
Your lender may be currently very busy processing many applications, which can slow things down. Other lenders offer fast online approvals. This is a good option if your application is straightforward but you're in a rush.
A mortgage broker can also help you find a lender who can process your loan fast. Brokers have contacts at multiple lenders and are well-placed to find one that can handle your application faster.
You can get pre-approval or begin the application process before sealing the deal on a property, but you can't actually get a home loan until you have signed the contract of sale.
It's entirely possible to find and apply for a home loan after you've found a property to buy. The biggest downside is you might have to rush to get everything organised before settlement. And if you can't find a lender because your borrowing capacity is too low or you don't meet the lender's criteria, the sale could fall through.
But the more organised you are in advance, the easier everything gets. Even if you don't get official pre-approval from a lender, you can start researching loans, find a conveyancer and gather your mortgage paperwork.
You can. There are many online lenders in the market who only offer online service and don't have physical branches. Keep in mind that some parts of the home buying process, such as dealing with a conveyancer, or getting your identity verified, may require a face-to-face meeting. Although these days some lenders and conveyancers may be able to facilitate every part of the process online.
This does happen. The trick is not to panic. Instead, you need to work out where you went wrong and take the necessary steps to have a solid application next time.
When you apply for a home loan your lender will look closely at your spending habits: that includes money spent on gambling. The impact on a mortgage application varies depending on your circumstances and how much you gamble.
Regular examples of gambling could hurt your borrowing power or result in a rejected application. This is because you could: End up missing repayments Have lower savings Have more debt Have increased ongoing expenses
When you apply for a home loan you'll need to provide information on your other debts and expenses, including if you have a car loan. This is so they can assess how much income you have left to service your repayments.
Having a car loan usually won't be enough to reject your home loan application, but it may reduce your borrowing power.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio
Richard's expertise
Richard has written 562 Finder guides across topics including:
Rebecca Pike is Finder's senior writer for money. She joined Finder after almost four years writing for business publications in the mortgage and finance industry, including three years as editor of Mortgage Professional Australia. She regularly appears as a money expert on programs like Sunrise and Today, as well as across radio and newspapers. She also holds ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products. See full bio
Rebecca's expertise
Rebecca has written 201 Finder guides across topics including:
When you apply for a home loan, a lender will take many serviceability factors into consideration when deciding whether or not to approve your application.
We speak to the experts about how your credit score impacts your home loan application.
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