As a first home buyer, the application process can sound daunting at first. That’s why we’ve broken down what’s involved in applying for home loan pre-approval into three simple steps to help you start seriously looking for your dream home.
1. Talk to a lender
Talking to a lender is normally the common first step in your application process. Your lender may be able to calculate your borrowing capacity and identify if you’re eligible for any government schemes, grants, exemptions, or concessions. Some of these include the Australian Government 5% Deposit Scheme and First Home Owner Grant.
Talk to a mobile lender today in person or over the phone and start the conversation.
2. Provide documentation
To complete your application, a lender will need to ask a number of questions and will need supporting documents to validate your information. Refer to our checklist for a comprehensive view, but the main categories of information you’ll need to support with documents are:
Proof of ID
Buying a home is one of the biggest financial decisions you’ll make, so your lender will need to confirm your identity before approving your loan. Be sure to bring valid photo identification, such as your Australian Driver Licence or passport, along with secondary identification like your Medicare card.
Residential and family status
If you're currently renting, your lender will need a letter from your real estate agency confirming the rental fees. Your family status is also important as partners and children are considered dependants in your application.
Income
A lender will ask for details about your income to ensure you’re able to support your loan repayments. This is to ensure you don’t end up suffering mortgage stress and are able to meet your repayments. Bring along proof of income such as your last two payslips, group certificate, and a bank statement.
Any assets
If you have savings at another bank, shares or any other significant assets, your lender will ask for written proof of these assets as this can help boost your borrowing power.
Deposit saved
The size of your deposit influences which home loan products you may be eligible for. Most lenders require a deposit of 5%-20%, and a larger deposit can often mean access to lower interest rates and reduced overall loan costs. You’ll need to provide proof of your deposit and demonstrate consistent saving habits, such as recent bank statements. If your deposit has been loaned or gifted by family, your lender may also request written confirmation outlining the terms of that arrangement.
Debt
If you have any existing debts (e.g., HECS-HELP, personal loans, credit cards or store cards), your lender will need to know how much you owe and the credit limits on each account.
Pro tip: To boost your borrowing power and reduce the risk of mortgage stress, consider paying down as much debt as you can before applying for a home loan. Depending on your circumstances, consolidating multiple debts into one loan or closing unused credit cards might help reduce your overall repayments, but you should seek personal advice to understand whether these options are appropriate for you.
A lending expert can provide insights into how best to do this. For an indicative checklist of documents to bring to your lender, visit our home loan application checklist.
3. Prequalification
When you’re ready to seriously start house-hunting, it’s a good idea to get your home loan pre-approved. Pre-approval gives you a clear idea of your budget so you can shop with confidence. Then, when you find your dream home, you’ll be ready to make an offer quickly – before someone else does!