How to apply for a fixed home loan

If you’ve decided that a fixed rate home loan is the right choice for you, the next step is to get started on your application. 

Applying for a fixed home loan is much the same as applying for a variable home loan and can be an easy process if you follow a few simple steps.

1. Get your finances in order

Before you submit a home loan application, you’ll want to make sure you’ve got your finances in order. This includes the funds to cover:

• your deposit;
• Lender’s Mortgage Insurance (LMI) if your deposit is less than 20 per cent;
• stamp duty and other government fees;
• legal or conveyancing fees, and;
• any loan application or establishment fees as required by your lender.

If you’re unsure of how much you might need to have saved to cover some of these fees, you might find it helpful to use RateCity’s home loan calculators for an estimate.

2. Gather necessary documents 

Once you’ve checked that your finances are good to go, it’s time to prepare all of your required documents. It’s likely the lender you’re looking to apply with will have a checklist for the documents you’ll need to provide, but generally speaking you’ll need the following:

• Proof of identity – Passport, Australian driver’s license, birth certificate, Medicare card.
• Proof of income – Payslips, bank statements, employment contract.
• Proof of assets and liabilities – Superannuation statements, shares and investments, credit card limits, personal loan balances.

Having these documents at hand when you’re completing your application can make for a more seamless process.

3. Apply for pre-approval

Home loan pre-approval is where a lender agrees in principle to provide a loan, but you or the lender can still withdraw. Many homebuyers seek pre-approval from a lender before they start shopping for a property, as it is an indication from a lender that you're (conditionally) eligible to apply for a home loan up to a certain limit.

4. Make an offer on a property

With pre-approval providing you with confidence in knowing how much a lender is willing to lend you, you can go ahead and make an offer on a property that you wish to buy. This may be at an auction or through a private treaty sale.

5. Await credit check and valuation

If your bid or offer is a winning one, it’s time for your lender to move through the next steps of the application process. During this stage, they will conduct a valuation on the property to determine the Loan to Value Ratio (LVR) and confirm whether the value of the property is enough to secure the loan.

The lender will also run a credit check and assess your credit history to determine your level of risk as a borrower. Generally speaking, the higher your credit score, the more likely you’ll receive approval and the better the interest rate you’ll be offered. Which is why it’s so important to ensure your score is in great shape before you apply for a home loan. 

6. Receive approval 

Assuming your application is successful, and your lender has granted you unconditional approval, it’s time to read and sign the formal home loan offer and contract.

7. Prepare for settlement

The final step of the process, settlement is the legal transfer of the property from one owner to the next. Your settlement may take place around six weeks after you sign the contract, but this can be negotiated between you and the seller to a longer or shorter time frame. A solicitor or conveyancer can help confirm that everything is done correctly.

Are there any obstacles to consider when applying for a fixed home loan?

One important factor to be aware of with fixed home loan applications is that even though the advertised fixed interest rate may be set at one figure, by the time your loan is processed and approved, that rate may have changed by the lender. 

Even if you have been granted pre-approval, the rate you are offered by the lender isn’t finalised until your application is processed. It’s particularly important to keep this in mind at times when interest rates are rising, as you could end up with a higher rate than you had anticipated. 

If you’re looking for personalised guidance and support in applying for a home loan, consider reaching out to a mortgage broker.

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