Follow these easy steps to speed up your home loan approval.
If buying your first home is on your radar, you may be wondering whether it’s possible to speed up the application process.
The good news is, the answer is yes. By following a few simple steps, you could positively impact the time it takes to have your first home loan application assessed and approved.
Step 1: Get all your documentation organised
The first step on the road to applying for a home loan is to provide the necessary documentation, including copies of your identity documents (i.e. passport, driver’s licence, Medicare card) and your most recent payslips.
“Lenders need to see evidence of your identity, income and expenses and any other assets you have in order to assess and approve your loan application,” explains BankVic lending specialist, Jay Farrell.
Your employment status is a consideration here – if you are a full-time permanent employee, you may only need to provide two payslips. If you are a casual employee you may need to provide more, as evidence of a regular income.”
You will also need to provide copies of bank statements (if you’re not a BankVic member) that show evidence of your savings and spending habits as well as any existing credit (personal loans, credit cards and so on).
“It takes time to pull these documents together, but if you have them ready for your lender, your application will move quickly through the important first stage. I’ve had loan applications approved within 24 hours when the borrowers have been organised,” says Jay.
Step 2: Understand two key acronyms – LVR and LMI
Understanding what LVR and LMI mean before you apply for your first home loan may help make the application process faster.
Most of the time, lenders look for a 20% deposit - or an 80% LVR. LVR stands for Loan to Value Ratio. If the borrower doesn't have that much saved, sometimes they'll still lend the money, but will ask the borrower to take out Lenders Mortgage Insurance (LMI), which can cost thousands of dollars.
“At BankVic we offer first home loans with a more generous LVR threshold of 90%, so buyers typically only need a 10% deposit without the need for LMI.” says Jay. “LMI is an additional expense that many first home buyers don’t factor into their calculations. It can catch you out because it can cost thousands of dollars and eat away at the funds you have saved to buy your first home. So it’s worth avoiding if you can.”
Step 3: Consider a family guarantor
One way of avoiding LMI is to have a family member act as a guarantor on your first home loan. This means your family member’s property acts as additional security on the loan.
“There is no transfer of funds involved in this process,” explains Jay. “Once the LVR drops below 80% – as the loan is paid off and/or the property goes up in value – we can release the family guarantee from the title.”
“Without having to pay LMI, your first home loan application may be approved more quickly” explains Jay.
It is worth ensuring that the family member seeks independent advice prior to agreeing to act as a guarantor, so that they are aware of the risks involved.
Our home loan consultants will help you every step of the way with personalised home buying help to suit your needs. Get in touch today.