4 Steps of the home loan approval process explained

Following the lodgement of a home loan application, borrowers are often keen to know what will happen next and how long it will take for them to receive the verdict. The home loan approval process can be challenging to understand, especially given most of us only go through it once or twice in a lifetime.​ Unfortunately, there’s no one-size-fits-all scenario, however, if you can submit a strong application from the outset, the entire process should be quick and smooth. Let’s explore the 4 key steps of the home loan approval process:

1. Submitting your application to the lender

You might choose to work with a mortgage broker, who will be best-placed to determine which lender is going to be most favourable to your circumstances. Your broker will also facilitate the entire application process, acting as your representative and trying to get you the best lending rates and conditions. Once your home loan application is submitted, the amount of time it takes for you to receive a response can vary. It’s most common to receive an answer between two days and two weeks, depending on a range of factors. The more complex the circumstances are, the longer it can take. Lender turnaround times will also be heavily influenced by their volumes at the time.

2. Property valuation is conducted

Before giving you conditional approval, your potential lender will need to make an assessment of your application and conduct a valuation of the property you intend to buy. Property valuations are critical to a lender in order to help them assess the risks of lending you funds to make the purchase. If you’re able to arrange a valuation in advance, provided it is acceptable to the lender, then this should expedite the home loan approval process.

3. Your application is assessed

The lender will assess your capacity to repay the loan amount you have requested. This is where all of the information you provided about your salary and liabilities come into consideration, and where accurate and complete information is essential. There can often be some to-and-fro between you, your broker and the lender should the lender request further information as the credit assessment takes place.Your potential lender will then make an overall judgement of you as a borrower. The complexity of your financial history will affect how long this takes. The biggest red flag to a lender is non-disclosure of liabilities, so, it is always best to provide full and comprehensive information about your financial situation. The complexity of the application process is just one of the reasons to engage an experienced mortgage broker, as they can explain the requirements and handle the application process for you.

4. Outcome of your home loan application

Following the submission of an application, you can expect your broker to be in touch with you to update you on progress and to notify you of the outcome. If your application is approved, your broker will also advise you of when to expect a formal letter of approval from your lender and assist you with any queries right up to and beyond settlement.

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