Apply For A Home Loan

Find all you need to know about how to apply and get approved for your home loan right here with Savvy.

Last updated on April 26th, 2022 at 05:15 pm by Cate Cook

Savvy's guide to home loan applications

Applying for a home loan – particularly if it’s your first – can seem a daunting prospect. A little research about how to successfully apply for your mortgage can reap huge rewards if it helps your loan application sail through to acceptance.

Find out all you’ll need to know about the loan application process, including the documentation your lender will need to see before your loan application can be approved. Read about the keys to securing approval here.

What steps do I need to take before I apply for a home loan?

The basic steps you should take before applying for a home loan are:

  • Determine what sort of loan you need
  • Work out your borrowing power and how much you may be able to afford
  • Gather together all the documentation you’ll need to prove your identity, your income, your assets and your debts

The sort of loan you’ll need depends on why you’re applying for a loan in the first place.

  • Most first home buyers opt for conventional principal and interest loans offered by lenders who can accommodate low deposits. Some lenders offer specific introductory loan packages for first-time buyers. These loans often have lower interest rates at the start of the loan and reduced or zero fees to help you get on your feet when first buying a home. However, they can sometimes come with high revert rates, meaning the interest after your introductory period ends is higher than the standard home loan rate.
  • If you’re buying land and planning to build your own home, look at construction loans, also called owner-builder loans. These loans allow you to pay your home builder in stages as building construction is completed and you only pay interest on the amount used for construction.
  • If you’re refinancing either to consolidate debt or after significant change in your life, you can think about standard variable rate loans or a line of credit loan to access equity built up in your home.
  • If you’re self-employed or a contractor and can’t provide the documentation required for a standard loan, you’ll be able to look at ‘non-conforming’ or ‘low doc’
  • Property investors might consider interest-only investment loans, which are typically offered at a slightly higher interest rate than standard owner-occupier loans. Interest-only loans can offer substantial tax benefits to investors and free up extra cash for them in the early years of their mortgage.

How do I apply (and get approved) for my home loan?

If you’ve followed the steps above, you are now ready to apply for your home loan.  You can choose which lender and loan best meet your specific needs by comparing with Savvy. Once you do this, you’ll be taken straight to the lender’s online application portal.

The next steps ahead for you are: 

Apply for pre-approval

Asking your chosen lender for loan pre-approval is the first step in the application process itself.  You’ll need to supply your prepared income and expenditure details to give your chosen lender sufficient information to decide if they’re prepared to offer pre-approval. You can receive an outcome on the same day you apply.

Shop around for your home

Once you’ve got pre-approval, you can start looking around for your dream home within your indicative budget, confident that you’ll have sufficient funds to buy it. This usually lasts for around three months, so you can take your time shopping if you don’t find your ideal loan straight away.

Make an offer and seek formal approval

A formal offer to purchase a property (which the real estate agent will talk you through) will include a section about the source of your finance.  Being able to specify ‘loan pre-approval successful’ will add to your credibility as a purchaser.  Assuming your offer to purchase is accepted, you’ll now need to re-contact your lender and ask for full loan approval.  They will want to know details of the property you wish to purchase and will arrange a valuation of the house.

Settle your loan and purchase

On settlement day your appointed conveyancer will arrange for your loan funds to be transferred to the vendor’s nominated account, and the title to the land and property will officially be transferred to your ownership.  You’re now the owner of your new home!

What documentation will I need when I apply for a home loan in Australia?

The documentation you’ll need before you make a successful application for a mortgage varies from lender to lender, but all lenders will want to:

  • verify your identity, usually with your driver’s licence and/or passport.
  • see a copy of your Medicare card, birth certificate and marriage and divorce certificates if applicable
  • sight at least one form of ID with a photograph and signature
  • see multiple copies of your payslips or proof of regular income, often 3 payslips worth of income is required
  • access copies of your bank and credit card statements so they can verify your income and outgoings
  • if you’re self-employed, lenders will need to see your tax returns – usually two years of financials
  • see proof about the details of any assets you own (cars, boats, caravans, shares etc.)
  • see proof of your utility bills, plus any investment or rental income you may have
  • find out about your liabilities – what you owe to other lenders in the form of credit card debts, plus other personal or store loans
  • know about your monthly living expenses and what spending commitments you may have.

Top tips about applying for a home loan: the dos and don’ts

DO check your credit report

Credit reports can contain errors and credit providers sometimes forget to update records to show you’ve made a payment. You can access your credit report for free once a year, so make sure to double-check everything is correct before you apply for a home loan to avoid any errors getting in the way of your loan being approved.

DO check out all your options before you commit to one lender

It’s important to compare as many lenders and loans as possible before you apply for your home loan.  Don’t just look at the big banks; these days, many credit unions and non-bank lenders can offer lower interest rates and more loan features to attract borrowers.  Look at all the different options available with Savvy to quickly compare loans before you apply.

DON’T rush your home loan application

Errors made when you apply for a home loan could cause unnecessary delays, additional questions and, in the worst-case scenario, a rejection from the lender. You should make sure all documents you submit are correct, clear, easy to read and in date order.  Also, don’t include the personal or contact details of anyone who is not a loan applicant with you.

DON’T change your job immediately before you apply

Lenders look at your employment history when you apply for a home loan and they like to see stability.  It’s far better if you’ve been in your current job (or at least the same profession) for a long while and earning a similar amount. Try to plan any career or work moves for after you’re in your new home.

Frequently asked questions about applying for a home loan

How do I work out my borrowing power?

Your borrowing power is an estimate of how much you may be able to borrow based on your income and personal circumstances.  To calculate what it may be, write down a list of all expenses you have to pay each month and subtract them from your monthly income, which gives you an estimate of what your disposable income is. You can also use our mortgage repayment calculator to see how much you can borrow based on current interest rates and different repayment terms. On average, most households in Australia spend around 30% of their total income on home loan repayments.

What other loan features should I look at?

The additional features a loan offers you can have just as much effect on how much you’ll end up paying for your mortgage as the actual interest rate.  Common extra loan features include:

  • an offset facility, so any savings you have are offset against your loan principal
  • redraw options, allowing you to redraw any additional repayments you make
  • repayment flexibility – so you choose if you repay your loan weekly, fortnightly or monthly
  • permitted lump sum repayments, allowing you to pay off your loan more quickly without penalty.
Is it best to apply for a home loan online or meet a lender in person?

These days, most financial services are transitioning online.  Loan applications which are 100% online are now becoming the standard, and loan comparison sites such as Savvy have replaced the bank manager when it comes to exceptional loan product knowledge. This offers you far more choice as a borrower.

How long does it take to apply for a home loan?

This will vary from lender to lender. You can receive pre-approval in as little as one day (if not one hour), while formal approval can take around seven business days. However, it’ll depend on how complex your financial situation is and how much background checking your lender has to do before approving your loan.  Most processes, including the purchase and settlement of your property, will take around four to six weeks in total.

Is government help still available for a first-time buyer who wants to apply for a home loan?

Yes – one of the biggest issues you face as a first-time home owner is saving for a loan deposit.  However, there is state and federal government help and assistance available for first homebuyers. The First Home Owner Grant and First Home Loan Deposit Scheme are Federal Government initiatives for first-time buyers to aid in the purchasing of property.  There are also state government concessions on stamp duty available.

How do I apply for a home loan with my partner?

Applying for a home loan with your partner is much the same as applying for a mortgage when you’re single, except lenders will check both your credit histories and current financial situations. Although couples can borrow based on their combined incomes, both your existing commitments and debts are also taken into account.