When purchasing a house, there are many steps involved to ensure you are secure for the long term. From the application to the settlement process, the overall process is often overwhelming. Understanding finance milestones when buying a house can help you decide how much cash you’re willing to put down upon settlement and how soon you’ll want to settle on the house.
To help you on your homebuying journey, we’ve broken down five common milestones you might experience when purchasing a property with a financial broker.
First Appointment – Pre Qualification
The first appointment with a financial broker can be daunting if you are inexperienced with the finance industry.
You can prepare yourself for the first appointment by compiling a list of questions about the finance process of buying a home prior to your meeting. This will help you feel more comfortable during the appointment and allow the conversation to flow better. An example of questions could relate to loan types, timeframes of each stage and comparing which bank or lender is better for you.
During the first appointment, your financial broker will ask you questions relating to your short and long-term financial goals, your current financial situation and the potential purchase.
After the appointment, your broker will require initial documents to be supplied to them so they can begin working on your file. Initial documents that may be requested include ID’s, payslips, bank statements and rental ledgers.
These documents will allow the finance broker to have an in depth overview of your current financial situation to see what your future of homeownership holds.
QPG Tip – When a financial broker requests documentation, it is important you send through all outstanding documents as soon as possible to avoid any unnecessary delays in your application.
Your Loan Becoming Pre-Approved – Conditional Approval
Once you have submitted all initial documents and your broker submits your finance application, the lender will review the application.
When you have Conditionally Approval, it means the loan has been assessed by the lender and initially approved, but there are other conditions that must be met for you to achieve unconditional approval.
The Conditional Approval financial milestone is an exciting time as you are one step closer to being a homeowner, but there are still few documents that must be supplied.
Conditions that may be requested could be the Contract of Sale for the property you are looking to purchase, bank valuation, updated payslips or bank statements, or clarification on your credit report.
It is important you understand the difference between Conditional Approval and Unconditional Approval. Check out this post to learn more about the distinction between Conditional Approval and Unconditional Approval.
Valuation
Once you make an offer on a property and sign the contract, a bank valuation will be ordered.
A bank valuation is required if you require a home loan to complete the purchase but is different to a market valuation.
A Bank Valuation – this is an indication of how the bank values the property to determine the total amount they will lend you.
A Market Valuation – this is an indication of how much the property might sell for in the current market. This is something a real estate agent will complete when providing a property appraisal.
A bank valuation will take into consideration the existing condition of the house, property attributes, locations, areas for improvement and recent sales of similar properties in the area.
If the bank valuation returns with the same value that you have offered to pay on the contract, you can proceed to the next step.
If the bank valuation returns with a lower amount to what you have offered, the bank will only lend money based on the bank valuation amount. This means there is a bit of work to be done as there is a shortfall for funds to complete the purchase. If there is a shortfall, you will be required to come up with the remaining amount. This could include finding more money to top up your deposit, having someone act as a guarantor or leveraging from existing equity.
Unconditional Approval
Unconditional Approval or Formal Approval means you have been approved for the home loan with no conditions.
After you receive Unconditional Approval, your lender will issue loan documents for you to officially accept the loan and prepare for settlement.
Depending on the lender, your loan documents may be sent to you via post or email. You will be required to sign all documents you receive and send them back to your lender’s solicitor in preparation for settlement.
Settlement – Closing On Your Property
Property settlement is the official process conducted by all legal and financial representatives for the seller and buyer.
When the loan documents have been received, your solicitor and lender’s solicitor will prepare all the legal requirements for the property to be transferred from the seller’s name into your name.
Once Settlement occurs, you will officially be the homeowner or landowner.
Buying a house is a big decision, but it doesn’t have to be overwhelming if you educate yourself about how the process works.
To help you get started, we can help assess your financial situation and prepare a detailed report of your current financial position, as well as provide guidance for making informed decisions based on what’s realistic for you. Our brokers can help you answer your questions.
Alternatively, you can request for a non-obligatory Homeownership Assessment to see what your future of homeownership holds.