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1. 100-point check
If you are approaching a lender for the first time — ie. you have no existing relationship with them — you will need to be "identified". That is, you will need to show identification up to the value of 100 points. A driver's licence earns 40 points, a credit card can earn 25 points and a birth certificate 70 points. Only original documents qualify.
2. Questions lenders ask
It is not unusual for a home loan application form to take up to 10 pages. There are four main points lenders look for:
- Your capacity to repay.
- Are you a good financial risk?
- What is your collateral? Is the property you are buying adequate security for the money you are borrowing.
- What are your existing assets? Some of the questions you can expect to be asked are:
- Your dependent children.
- How long have you lived at your current address?
- What do you owe and own?
- Your accountant's details.
- Your personal insurance.
- Your credit cards.
3. What you need to take
To speed up the home loan process, it is recommended that you take the following documents with you to your meeting with the lender:
- At least the two most recent pay slips, and group certificates for the past two years.
- A letter(s) from your employer(s) detailing income (for the past two years) and length of employment
If you are self-employed:
- Past two years' tax returns and your accountant's details, or past two years' financial statements and your accountant's details. Some institutions may even ask for a profit and loss statement certified by a registered accountant.
Saving details:
- Bank statements including transaction, saving or passbook accounts.
- Investment papers including managed funds or term deposits.
- What you owe and own.
- Details of personal loans, credit cards or charge cards. Up to six months of statements should be produced to support these loans.
- Tax liability (if self-employed).
Life insurance policy details.
- Superannuation details.
- Approximate value of other assets such as furniture and jewellery.
4. How much can you borrow?
The amount you can borrow depends on what you are buying and how much money you have left when you take out all your fixed commitments from your net income.
If you are buying a home, most lenders will let you borrow up to 80% of the purchase price, or 95% if you are willing to take on mortgage insurance. Mortgage insurance is designed to protect the lender. A number of online calculators can help you determine how much you can borrow. However, please note that these online calculators will only give you an indication of how much you can borrow and is not true amount of what the bank may lend you.
5. Payment timeline
There is more to buying a home than the deposit. Remember to also factor in the fees and charges applicable to a home loan, including:
- Stamp duty
- Mortgage insurance
- Legal fees
- Pest and termite inspection
- Loan application fees
- Loan establishment fees
- Service fees
- Valuation fees
- Account transaction fees
- Exit fees (or deferred establishment fees)
Many fees and charges depend on the amount you borrow and the price of the property.
About Intellichoice
Intellichoice are experienced mortgage brokers with its head office in Brisbane, Australia. Intellichoice aims to help everyone achieve their dreams through home ownership and other investments. The experienced financial planners at Intellichoice can assist you with home loans, business loans, commercial loans, owner builder finance, development finance, personal loans, insurance and more.
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