The loan process explained
The role of a mortgage broker is to make the home loan process as smooth as possible for borrowers. While it might seem simple, securing the right finance can be a complicated and lengthy procedure so it’s important to know exactly what’s involved when your clients are referred to a mortgage broker.
Getting to know the customer
The first step for a mortgage broker with every client is to learn about their personal circumstances and better understand their current financial situation, what they’re aiming to achieve through their property purchase as well as their longer term financial goals.
Identifying borrowing capacity
In most cases a customer will already have an idea of how much they want to spend. They use tools such as online calculators to help determine how much they can borrow, but they’re often surprised with the variety of options a mortgage broker can gain access to.
At Loan Market we can assess over 1,000 products from 34 lenders for each client we work with. By using the borrower’s unique information, we can identify the suitable options available.
Deposit, loan and purchase costs
Many buyers won’t have a 20 per cent deposit saved. If this is the case, they need to evaluate alternative options such as accessing equity, a family guarantee, insurance options and grant eligibility.
On top of their deposit, a borrower needs to be across all purchasing costs to make sure they are budgeting correctly and can manage the transaction. Costs they need to consider include:
- Loan application fees
- Valuation fees
- Lenders Mortgage Insurance (LMI) - if they’re borrowing more than 80 per cent of the property value.
Agreeing on a home loan product
Once the most appropriate loan products have been identified (based on a buyer’s personal situation, goals and current financial situation) the borrower can compare each mortgage option and assess various rates, features, fees and charges to identify what’s right for them.
Once a customer has found the right mortgage product, it’s time to apply for pre-approval. To gain a formal pre-approval a lender will assess income, expenditure, assets and liabilities to confirm how much a customer can borrow.
Making an offer
Once they’ve obtained pre-approval, a client can confidently begin their property search. When they find a property they’re interested in buying, they need to organise a valuation (which is something their mortgage broker can arrange).
Finalising the loan
As the borrower secures their new property, the home loan application needs to be completed - with supporting evidence - and lodged with the chosen bank or lender. The application is then assessed by the lender. If they come back requesting additional information, the borrower will need to supply it before the loan is approved.
As soon as the application is unconditionally approved, the customer is given a formal Letter of Offer to sign. The first loan repayment will usually be due one month after settlement.
As you can see, it’s a lengthy process. That’s why it’s important for buyers to get their finance in order as early as possible.