What to prepare for a home loan application

Before meeting with Lynnette, please prepare the following information:

1. Confirmation of your income
2. 3 months bank statements on your cheque/everyday account 
3. Confirmation of your deposit (if you don't already own a home) 

1.   Income
Confirmation of income includes:

• 2 x Pay-slips or ...
• Letter from employer stating salary or hourly rate of pay and average hours p/week or ...
• 2 years financials (if self-employed)

2.  Bank Statements
Your last three months statements on your cheque/everyday account. This is not to check up on what you spend, but to ensure there is no recent history of dishonoured cheques or payments.

3.   Deposit
Unless you already own your own home, you will be required to prove your deposit. Savings account statements, term deposit certificates and investment statements are examples of evidence of deposit.

What else?

Once the loan application progresses further, you will need to provide the following:

• Sale and purchase contract on your new home
• Property valuation (in most cases)
• Rent Appraisal (if property is for investment purposes)

Overtime

Banks need evidence that you have been receiving the overtime for at least two years before they will take overtime into account.

Guarantors

This is an increasingly common option. Generally though, because banks are quite wary of people who cannot save their own deposit guarantors will also have to be on the loan documents and must therefore also be able to afford the loan repayments. Some banks will also require those acting as guarantors to seek independent legal advice about the implications of being a guarantor before approving the loan.

Loan to Value Ratios (LVR's)

In the past, banks have lent up to 100% for an owner occupied property.  This is no longer the case.  It is now more common to lend with equity from another property (perhaps a guarantor?), and/or using savings you have accumulated.  When you borrow over 80%, you may be required to pay Lenders' Mortgage Insurance. This insurance protects the bank for the higher risk associated with low equity loans (under 20% deposit).  Many banks today are preferring to not lend above 80%.  To calculate your loan to value ratio simply divide the amount you wish to borrow by the property value. For example you wish to purchase a $300,000 house and have a $40,000 deposit, your LVR would be 260,000/300,000 = 86.7% LVR.