How to apply for a home loan in 6 easy steps

Article summary:

• First, find out what you can afford by getting prequalified with ooba Home Loans.
• Find the house you want and sign the Offer to Purchase.
• Submit your home loan application to multiple banks so you can get the best deal.

Purchasing a home is an exciting step in your life, but you first have to find a way of funding it. The standard way of doing this is to acquire a home loan from the bank.

Competition between banks not only increases your likelihood of getting a home loan but of getting a deal that suits your situation.

We provide a guide to applying for a home loan so you can embark on the process with confidence.

1. Get prequalified

First, you need to find out what you can afford, which you can do by getting pre-approved with ooba Home Loans.

We will assess your financial situation and provide a solid estimate of what you can afford.

We also assess your credit record, which is the most important factor in determining your chances of home loan approval.

If you apply for a home loan within the price range that we’ve provided, our pre-approval certificate will serve as proof to the bank that you can afford the home loan, improving your chances of a successful application.

You can get pre-approved by contacting an expert at ooba Home Loans or by using our free, online pre-approval tool, the Bond Indicator.

2. Find a property you like

An estate agent can be an invaluable assistant in helping you find a property that meets your requirements.

Be sure to research the neighbourhood in which your desired property is located. You don’t want nasty surprises like a noisy neighbourhood or frequent car robberies.

Try to attend house viewings instead of just relying on photos of a property.

3. Sign the Offer to Purchase

Once you’ve found the home you want, you make an Offer to Purchase. This is a document that you and the seller will need to sign. It dictates the terms of the deal and the clauses that need to be fulfilled by both parties.

Terms you should add to the Offer to Purchase include the requirement for the seller to conduct a home inspection so defects can be fixed before the home purchase goes ahead.

Be aware of the 72-hour clause

This clause allows the seller to continue marketing the property. If they receive a better offer, they have to give you 72 hours’ notice before they can accept it. If you fulfil your obligations within those 72 hours, the seller can’t accept the other offer.

Most sellers will refuse to remove this clause.

4. Organise the required documents

You will need the following documents when applying for a home loan:

• A completed and signed application form.
• A copy of your ID document.
• Proof of residence.
• A copy of the offer to purchase containing both the seller and purchaser’s details (not necessary for pre-approval).
• Proof of income. You will need to provide a salary slip (not older than two months), or a letter from your employer with a breakdown of your salary and deductions. If you are self-employed then you will need a letter from an accounting officer confirming your income, or a statement of your assets and liabilities.
• Six months’ worth of bank statements.
• A copy of the marriage certificate (if married).

5. Submit your application

The best way to apply for a home loan is with a home loan comparison service like ooba Home Loans.

We submit your application to multiple banks, so you can compare the deals they offer and choose the one best suited to your situation.

Factors include home loan repayments and interest rates. Interest rates can vary depending on how much of a risk the bank considers you to be. Your credit record will be an important determinant in this.

Competition between banks means some will offer lower interest rates than others, hence why applying to multiple banks with ooba Home Loans is your best bet.

So apply for a home loan with ooba Home Loans to get the best deal.

6. Pay your deposit

Most home loans require a deposit of at least 10% of the purchase price.

The higher the deposit, the better your chances of approval and the lower your interest rate.

So the best thing you can do when planning for a home purchase is to put aside funds each month towards a deposit.

However, many banks offer the option of a 100% home loan. This removes the need for a deposit, although the catch is higher interest rates.

Your best chance of obtaining a 100% home loan is to apply to multiple banks.

What you need to know about your credit record

Your credit record is the most important factor banks will take into account when assessing your home loan application.

Your credit score will be a three-digit number ranging from 0 to 999.

You need a credit score of at least 610 for the bank to consider your home loan application, while anything above 661 is considered a decent credit score.

Here’s a more detailed breakdown:

• 781 to 850. Excellent.
• 661 to 780. Good.
• 610 to 660. Fair.
• 500 to 610. Poor.
• 300 to 499. Very poor.

As mentioned, you can find out your credit record by getting pre-approved with ooba Home Loans.

If you’re worried about a low score, you can work on improving your credit record. Measures include:

• Checking credit reports for errors.
• Paying outstanding debts.
• Reducing the credit ratio to below 30%.
• Settling and closing accounts.
• Limiting requests for new credit.
• Encouraging your spouse to take the same measures.

Take into account additional costs

The home loan repayments and interest rates aren’t your only concern. Be sure to set aside funds for additional costs, such as:

• Bond registration and transfer costs.
• Moving costs.
• Repairs and maintenance.
• Utilities.
• Rates and levies.
• Security.
• Home Insurance.

Knowing what you can afford

As mentioned, pre-approval is the way to find out what you can afford before applying.

We recommended pre-approval as your first step, even before embarking on the house hunt.

You can get pre-approved by contacting an expert at ooba Home Loans or by using our free, online pre-approval tool, the Bond Indicator.