Applying for a Home Loan

Are you the kind of person who breaks into a sweat each time you have to take up some paperwork? Well, buying a home is daunting and going through the procedures involved in applying for a home loan can be intimidating. But it need not be so, if you are prepared and have all the facts and figures on hand. You will be less stressed out if you know what documents are required. Planning is of the essence, so here’s a small guide to make life a wee bit easy for you.

You could start off by meeting with a mortgage broker who will discuss with you the home loan rates that suit your financial situation the best. Once you have selected the loan that is most appropriate for you, your application procedure begins. The process from the first interview to the full approval will be the same across home loans and lenders. Depending on how easy or difficult your situation is, the process could take anywhere between a couple of days to a few weeks. You should be prepared for a fortnight before you get approval and another fortnight before the settlement is done.

The mortgage broker will help you with the documentation you might need for the application. He or she will then take it to the lender you have chosen for an application. Some of the documents required could include but not limited to the following:

  • Your passport, visa, or citizenship certificate
  • Drivers’ license
  • Pay slips, a letter from your employer that states your salary or a copy of your contract of employment
  • Marriage and birth certificates
  • Complete record of tax returns of the last two years
  • A recent statement of savings accounts
  • A copy of your loan statements of six months on the existing mortgages
  • Your latest IRB (or Inland Revenue Business) tax statement
  • A copy of the plans, fixed price contract and specifications for construction

The other documents may include proof of your existing and proposed rental incomes, copy of sale contact on your existing home or settlement letter from solicitor (if deposit has come from existing home sale), among others, depending on the lender.

Assessment of documents

Following the presentation of documents, your lender will assess the application to evaluate your situation, confirm your income and do checks on your credit background. The documents will be assessed during this period as well. Once the lender completes the assessment, the mortgage broker will get an approval which is conditional. The lender will chart out the any issues that need correction before unconditional approval is given.

Kinds of property valuation

Meanwhile, an assessment of security will also be carried out, and may need property valuation. The valuation needs to be at the cost of the buyer, but the mortgage broker will help you get a valuation. Prospective buyers need to get the property valued by an independent and registered valuer. The kind of valuation that may be required depends on several factors including the amount of loan, the kind of home you have chosen and the lending policies of the bank. The three kinds of valuations are rating valuation, full-market valuation and an e-valuer. An RV or rating valuation is done only once in three years, and is not a true indicator of a property’s value. A full-market valuation gives you the present market value of a property and list of recent sales that can it can be compared with it, in the area. E-valuer offers an estimate of a property’s value in the market at present.

After valuation, the lender may also submit your application for an insurance evaluation. Once the home loan has been fully approved, a formal letter is issued. The loan settlement will then be taken up and the repayment on the loan will generally start a month after date of settlement.