Banks follow a standard loan application process. The following stages are indicative of a bank's assessment procedure from application to settlement.
Home Loan Application:
It all starts by completing a home loan application form with your chosen bank. The loan application becomes a legal document once completed and signed by the applicant and submitted to a bank for processing with all supporting documentation.
The bank will rely on the information provided by the applicant to be true and correct. The bank will also rely upon the documentation provided by cross referencing and conducting credit checks with Baycorp Advantage.
It is important to have all your documentation with you at the interview. You need to provide your most two recent pay slips from your employer or your last two year's tax returns if you are self employed. You must also provide savings accounts statements showing at least 5% to 10% savings deposit contribution if purchasing a new property (you might have to show a higher level of deposit if your new purchase is over $500,000). If you are re-financing you will have to show at least your last 6 months home loan statements from your current mortgage provider. You will need to provide original identification documents (for each applicant) for the purpose of satisfying federal legislative requirements such as a current driver's licence and passport there are many other documents that satisfy compliance. Your banking officer will provide you with a list.
During the interview the banking officer may request other financial documents to support the loan application. The bank will verify all documents provided. You must also show sufficient savings to cover all borrowing and statutory costs - please refer to our Borrowing Costs Calculator for a detailed summary.
Assessment of Loan Application:
Once the loan application has been completed and signed with supporting documents attached the application will be submitted to a bank's credit assessor. The assessor's job is to approve or decline the application based on the information you have provided. The assessor will analyse whether you can afford the loan amount applied for. He will verify your employment details such as your income and employment history, your credit record and all other documents. It is important to understand that your borrowing capacity depends either on your income level or your deposit savings. Either will show a different borrowing level. The lowest amount will prevail. Please refer to our calculators How much can I borrow with my income and How much can I borrow with my deposit for an estimate of your borrowing capacity.
Financial capacity will vary depending on various factors such as your income level, your deposit contribution, your area/suburb of purchase, changes in interest rates and other banking assessment policy guidelines.
Once the credit analyst is satisfied that all the documents provided and all other details meet with banking policy requirements he will issue a conditional approval. The conditional approval may be subject to certain special conditions such as pending approval from the mortgage insurer. However, it always subject to the valuation (s) of the property to be purchased or re-financed. At this stage the valuation is ordered by the bank. In the majority of cases the valuer is an independent 3rd party (not employed by the bank). The valuer provides a valuation report to the bank. The report must satisfy the bank's policy. Please be aware that it is not advisable to exchange on a contract of sale for a property until a formal/unconditional approval is obtained.
Once the valuation report has been accepted by the bank (and approved by the lenders mortgage insurer if required) the formal approval will be offered with full terms and conditions of the mortgage.
The mortgage documents are usually signed before a solicitor as they may be complex and a solicitor will clarify legal issues that may need to be addressed before you actually sign the documents.
Once you have signed the mortgage documentation and returned them to the bank or bank's legal representative they will make sure that all requirements are met such as a signed copy of transfer of ownership is in place and all other special conditions (if any) have also been met. At this stage the bank will arrange with your solicitor or conveyancer a settlement date. Once the settlement will take effect you will become the owner of the new property and liable to the bank for the loan amount plus interest for the term of the loan.