What goes on behind the scenes of the home loan application process and why does it all take so long (part 2)

Content reviewed and updated April, 2014

What happens during the time you wait for your loan to get approved? In Part 1 of this post. we looked at what’s involved with submitting the home loan application and the obstacles that can be experienced along the way. Today, we explain the process of seeing a mortgage broker and what tasks we have to complete to get your home loan approved.

Property valuation: an important step in the process

If the lender issues a conditional approval, the next step is to organise a property valuation. This is usually organised by the lender and is an important step in the process because it allows the lender to confirm that the purchase price for the property you are buying is reasonable and in line with market value.

It can take up to five days  to organize the valuation because:

• The lender generally outsources the valuation so it is subject to the availability of a valuer.
• It can sometimes take a few days for the valuer to gain access to the property. If the property is tenanted, a real estate agent needs to notify the tenants and book in a convenient time to gain access.

If the valuation comes in as expected, the next step is to obtain Lenders Mortgage Insurance approval if LMI is required. This usually occurs within 24 hours of receipt of the valuation. At this point, the lender is able to issue a final unconditional approval. Again, this usually occurs within 24 hours of the approval of mortgage insurance.

Loan offer documents

The good news is that contracts of sale can be exchanged at this point.

A letter of offer is issued by the lender and this generally takes three to five days from final approval. Your solicitor or conveyancer will need to check and make arrangements for you to sign and return the letter of offer to the lender.

On the home stretch … settlement

The mortgage and other documents need to be prepared next. This usually happens when you return your signed letter of offer, although some lenders will prepare all the documents simultaneously.

Looking ahead to settlement and exchanging contracts, a mortgage broker will attempt to make sure everyone has the right documentation. At this crucial point in the process, we definitely don’t want any delays occurring because the bank has not received all the right documents.

So who does what before settlement?

• Preparing mortgage documents – the lender
• Executing mortgage documents and returning them to the lender – completed by you and your solicitor/conveyancer
• Title and other searches completed – completed by the lender’s solicitor/settlement agent and your solicitor/conveyancer
• Stamp Duty concessions/exemptions – organised by you and your solicitor/conveyancer
• Stamp Duty payment – organised by you and your solicitor/conveyancer
• First Home  Owner Grant receipt – organised by the lender’s solicitor/settlement agent

Settlement can now take place!

There’s a lot to keep on top of and a good mortgage broker will keep chasing all the parties concerned – especially the lenders. Your mortgage broker should have an excellent relationship with the lenders on their panel and will spend a lot of time on the phone on your behalf to keep things moving.

Useful links:

If you have any further comments on seeing a mortgage broker and organizing a home loan, leave us your comments below.