How long does home loan approval take?

Buying property can be an exciting experience, but the home loan application process can be a little overwhelming if you’ve never been through it before. How long does it take, what documents do you need, and how do you speed up the process? These are common questions first-time property buyers often ask, but you can find the answers with the right research.

Depending on which state you live in, the complete process usually takes anywhere between four to six weeks. This timeline is from submitting the home loan application to reaching a settlement on the property and getting the keys. However, other factors are at play that decide how long a home loan takes to get approved. The lender, the complexity of your situation and how quickly you return your mortgage documents all play a part in the speed with which your home loan application gets approved.

You must understand that every borrower, lender and loan application is unique. Hence loan approval times always vary based on all these factors.

A pre-approval can speed up your home loan application

It helps to start the process of your loan application by getting a pre-approval. Getting pre-approval gives you an idea of how much you can borrow depending on your current financial situation. You’ll also move through the purchasing process faster as you’ll know how much you can afford to pay and the repayments you’ll need to make. With pre-approval, you can also make an offer on a property faster than those who don’t have it, or at least with more confidence about your budget. Once you have an offer accepted the final approval process will also move much faster, which means owning your home sooner.

Spending some time at the start of your application process to get pre-approval will save you time later. Not to mention the stress of not knowing how the application is progressing. Your lender can help you get this underway within a day.

What documents do I need to submit for pre-approval?

The process of getting a home loan can seem daunting, but things can work easier if you can provide all the required documents. These documents are usually needed when you also submit your application form with your lender. Some lenders even allow you to submit the documents online. Lenders also often employ mortgage specialists who’ll review your application and guide you through the next steps.

Here’s a list of documents most lenders ask for:

• Any acceptable proof of identification such as drivers licence or passport
• Financial statements including savings accounts and term deposits
• The last three to six months of your most recent payslips. Self-employed individuals can submit their Business Activity Statements (BAS) for the last two years
• Any other sources of income, like a rental property or investments
• Documents of all current debts and expenses, like credit cards, utility bills, HECs debts, rent, etc.

The lender will assess your home loan application once they receive all documents, which should typically take three to five business days. Remember, your home loan pre-approval will take longer if you cannot provide all the required documents. It’s well worth your time to take the time to get yourself appropriately organised as the pre-approval is valid for three to six months.

What’s the step after submitting my documents?

Once your application is reviewed the lender moves on to the next step, which is property valuation. Unless you’re only asking for pre-approval in which case valuation will occur when you find a property. Valuation usually takes three to five business days, depending on the nature of your property and your application.

If you’re borrowing 80 per cent of the property value, some lenders will rely solely on the details in the contract of sale.

Some lenders require a full valuation, in which case you could potentially have to wait for five to seven business days for formal approval. The actual time it takes will depend on the valuer’s availability and the agent managing the property. Other lenders might be happy with a ‘kerbside valuation’ where the lender sends a representative to the property to verify the property details match the contract of sale.

I’ve got formal approval of my home loan application. What’s next?

Once you’ve got your formal approval, the challenging part of getting a home loan is over.

Now all you’ll have to do is sign the contract of sale, make sure to seek the advice and assistance of your conveyancer for this. Go through the terms carefully with your conveyancer’s assistance to make sure you understand it all before signing and don’t rush into the sale. How long you have to wait after getting the formal approval and signing the contract of sale depends on how well organised both you, and the vendor are.

You might be required to pay Lender’s Mortgage Insurance (LMI) if you’re borrowing more than 80 per cent of the property value. There is an additional approval you’ll need for this, and it could take one to two business days to process.

Meanwhile, the lender will prepare the loan offer documents for you to sign and finalise your home loan. This should take approximately two to seven days. 

The final stage in the home loan approval process is the settlement. This is usually four weeks after signing the contract of sale. During settlement, your conveyancer will help arrange for the funds to transfer from the lender to the vendor to complete the purchase. Once this is done, you will receive your home loan details, including interest rate, repayment amount, and schedule.

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