- There are some very easy to follow steps that will help speed up your home loan being approved
- They are; Be organised, Learn about LVR and LMI, and Consider a family guarantor.
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 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 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.
LVR stands for Loan to Value Ratio. It compares the amount you want to borrow with the value of the property you want to buy. The greater the LVR, the harder it can be to have your loan application approved. Loans for less than 80% of a property’s value are often preferred by lenders, however as a first home buyer, it’s not always possible to save a 20% deposit plus costs. Jay suggests talking to your lender about your options if you want to borrow a greater proportion of the property’s value.
LMI stands for Lenders Mortgage Insurance. This is a one-off payment which protects the lender if you cant afford to meet your loan repayments.
“At BankVic we offer first home loans with a more generous LVR threshold of 85%, without the need for LMI so buyers typically only need a 15% 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.”
“At BankVic we are proactive in looking for ways to help our first home buyers avoid having to pay LMI,” says Jay.
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.”
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.
As a BankVic member your first home application process could be faster, as our lending policies are designed to prioritise our members. Contact us today to find out more about the benefits of banking with BankVic.