Getting a Home Loan Approved

how your home loan gets approved

The most important thing to know about getting your home loan approved is that a Lender is in business to lend money. While it might not always seem this way, when assessing a loan, a lender is looking to see why they would approve, not decline a loan application. There are essentially two main steps in the home loan approval process. Firstly your ability to make the loan repayments is assessed and secondly, the property you wish to purchase is valued to ensure it is an 'acceptable risk' to the lender.

As outlined at Home Loan Application Process, there is typically a series of steps that any loan travels through. Outlined here is how your loan usually gets approved or declined as it travels through that process.

Credit Score - Computer says yes or no

In the simplest terms, almost every lender now processes your application by loading your information into a Credit Scoring system when it is first received. Effectively, nearly every line on the Application Form you filled in is loaded and given a weighted score. If your score passes a pre-determined level, you will more than likely be 'conditionally' approved. If your application is in order, 'conditional approval' generally means you are approved, subject to property valuation.

What if Computer says no?

If you are knocked back by the computer scoring system, your application will then usually go to a (human) credit manager who will manually assess your application. The credit person will also most likely come back to you through your lender or your broker for more information on the areas they might want to check further. Often, it is in this situation where a good broker will prove their worth.

Be aware that your loan application is effectively an audit of your borrowing / repayment capacity. If you have been rejected, while it is disappointing, it could be time to re-look at whether the amount you want to borrow is appropriate.

"Amazing tenacity to get the deal done. He is like a dog with a bone. Doesn't get pushed around by the banks, and has some clout with his business relationships to get the best result. I have passed Paul Moulday's card to everyone I know in my circle of associates" Simon Howden- Malvern

Proof

For a standard home loan you will need to prove your income and assets / liabilities, residence, savings and identity. Proof of identity is not negotiable and required by all lenders in Australia. No-documentation and low-documentation loans require limited or no proof of income, but still require proof of identity.

Credit Profile

When you are applying for a loan, the information on your credit file is taken into account. More detailed information on how your credit profile works and influences your application can be found at Credit Profile - How does it work?

property valuation

All approvals are 'conditional' until the property securing the loan is valued by the lender. Your valuation is usually provided by an independent valuer, who assesses the property and provides a report to the lender. Once the valuation is in, the lender checks that it is within the parameters of the conditional approval amount and if it is, sets the loan to uncontitional approval. For more infomation on valuations, go to our Valuations For Home Loans page.

How using a Broker helps get your deal over the line

Successful loan negotiation is often a matter of convincing the credit person with the loan application sign off authority that your application should be approved. While your application still needs to stack up, a broker can help you provide the correct information and negotiate on your behalf. Understanding how a lender's credit scoring system works can make the process a lot easier for you. Good brokers know their lenders' products and policies and understand how they work.

How long does it take?

Depending on the complexity of your situation, the time from the initial meeting to a final approval will take anything from a few days to a couple of weeks. For more information on the application processing time and what happens when, go to Home Loan Application to Settlement Process.

Non Conforming Loans

A non conforming loan may be applicable to you if you cannot get a traditional home loan (see more information at Non Conforming Loans). If so, here are some extra tips to be aware of:
Security quality is paramount to a non conforming lender as they will typically take a risk on the borrower but not on security. Your asset must be in a satisfactory condition and be suitable for mortgage purposes.
You must have an acceptable reason for the non conforming nature of your application that matches your application. (i.e. if you have defaults and judgments that date back 5 years and your explanation states the reason as some sort of issue in the last 2 years, then this will obviously not make a lot of sense.)
Supporting evidence is very important. All lenders will have a checklist, but given what non - conforming lenders generally have to consider, it is important that you try to meet all evidence requirements fully as it will make your application go through more easily.  Often the supporting documents are not onerous and can sometimes be less than normal lender requirements.

Keep a copy of your application

With many of the bigger lenders, once your loan is approved, it goes off to a large processing centre. Make sure you keep a copy of your application and it's attachments in case you need to reference it at any time.