Let’s get you back in the driver’s seat…
There is no doubt the Finance Industry is full of its own importance. By seeming confusing and complex it can leave you feeling vulnerable and immaterial. People have made lifelong careers by looking down their noses at hopeful borrowers and feeding off the power they have over making or breaking someone’s dreams.
At Ink Wealth, we think it’s time to take back your freedom!
We’re committed to that… and it all starts with education. (Knowledge = power, and all that.)
In fact the loan process is really quite straightforward when you understand the requirements and the roles of everyone involved. Keep in mind that there are many people involved to make it happen, with the main players being lenders, valuers, solicitors, accountants, vendors, real estate agents, insurers, you and us. No one dares to say it, but in reality this is an ad-hoc team thrown together by default with most people working for their own interests.
But remember: we’re the ones in your corner! Together we build a partnership designed to deliver you through the maze to achieving your goals.
In a nutshell:
- We find out where you are financially
- We find out what you want
- We help you with what you need
- We build a plan with a recommendation
- When you agree, we complete the application
- We submit the application to the lender
- The property is valued
- When approved the mortgage documents are issued
- You sign and return them
- The settlement date and time is booked
- The settlement completes
- Your new accounts are opened and functioning
- We ensure everything is set up as it should be
- We monitor your plan and enhance it as you grow your wealth
A bit more detail…
Fully understanding the process and avoiding potential obstacles will help prepare your expectations and assist in getting you to where you want to be.
Unfortunately, the lending system does require extensive documentation. There is no way around it – gone are the frivolous days of low doc lending! The general rule of thumb we use here is….the better the docs the quicker the approval. Out of everything that happens, this is the one area that you control. It is also the one thing that will ultimately have the biggest impact on the process.
See what we mean… most of the industry talks about how important THEY are in YOUR process. Every chance they get, they will say how important their role is, but here at Ink Wealth, we empower you take control of the system and use it to build your dreams, not someone else’s.
While it may seem daunting at first, it really isn’t that bad. We can’t stress enough how powerful it is in the wealth creation game for you to know where you are with good clean record keeping.
Chill out… we will help!
We will kick off with a telephone discussion in order to get a clear understanding of your current circumstances and your aspirations. We are each unique with our own set of circumstances, so tell it like it is! It’s vital to capture everything that will affect your approval before the lenders do. Remember we want YOU in control – not the banks.
There is no doubt the lenders will check your lending history. In the industry this is referred to as a credit file check. Here at Ink Wealth, we actually suggest you be proactive and know your own credit rating way before the lenders take a look. This simple change of thinking allows us to create a robust plan that will deflect the lender’s interrogation when the time comes.
You also need to understand that there is no judgment here; ultimately we respect the people who take charge of where they are and where they want to be, regardless of where that is!
As we said, we are here for you. Our 5 Minute Financial Health Check and our About You Questionnaire will give you the means to clearly identify where you are.
Once filled in, we will have a clear understanding of your starting point and we can then develop a plan to ultimately achieve your goals. We will send you a recommendation or scenario outlining a strategy designed specifically for you based on what you have told us. You can see now how logical it is to make sure we have all the info.
Once you understand and accept the recommendations in the plan, we move into the application stage. Here we will need to gather all the supporting documents required by the lenders. Again we’re here to help. We will send you the Ink Wealth Document Gatherer that will clearly tell you everything we need to pull together for the application. We will also provide you with a detailed quotation, commission disclosure statement and the lender’s application and privacy consent forms.
At this point, understand that we can’t proceed with an application without these. The lenders will reject us before we get a foot in the door. In our experience, this area is the single biggest hold up in the application process. Clearly knowing what you need and getting it to us quickly and cleanly is the key to an impressive application.
Think of it as your financial CV and you’re trying to get a lending interview!
- Each lender and different types of loans have slightly varying requirements. Pay close attention to providing exactly what is asked for and unless otherwise stated, ensure that documents are the most recent available.
- Proof of Income (payslips/tax returns) must be your most recent and where multiple documents are required, they must be consecutive. They must clearly show your employer’s name, your name and preferably annual salary or a YTD figure that allows an accurate annual figure to be calculated.
- Bank statements unless otherwise stated must be original printed (not internet) statements and must be complete documents (all pages) showing account numbers, balance, limit and transactions for the period specified.
- We may have to provide an explanation where credit card or overdraft accounts exceed the authorised limit.
- Identity Documents need to be correctly certified and clearly show certifier’s details, document number and date of issue.
- First Home Owner’s Grant and other possible government grants require you to complete the relative forms which may require separate supporting documents like identification.
Before submitting we will provide you with a detailed summary of the application and we will ask you to double check and point out any corrections that are required.
We can then confidently submit the application.
Once the application is lodged we are in the hands of the credit processors. Even the best applications may still need to be adjusted depending on the lender’s criteria. This is because we will often be trying to maximise lending capacity which will always draw more scrutiny from the lenders. Through this part of the process we are in continuous dialogue with the lenders and will only contact you with any necessary updates, adjustments required to the application or further requested documentation.
It’s important to know there are different stages or types of approvals that allow for greater flexibility for people at different stages of the purchase timeline.
Pre-approval or approval in-principle
A pre-approval is not a full approval. It is used to give an indicative amount that the lender will be willing to lend providing that the documentation supplied is accurate. In some cases the lender may not even validate your employment or income information. It is used as a quick means to give borrowers an indication of their purchasing ability while they are actively looking in the market. A small trap to the unaware: be aware that a change in your employment, your deposit amount, a car lease or personal loan etc, could jeopardise your final loan approval and most likely would result in an adjustment to the original application. Also, the interest rate and product quoted at the pre-approval stage may have changed through the period.
Conditional approval is requested once the purchaser has found a property and exchanged on contract for sale. Now the lender will validate the full application and all its supporting documents. It is called conditional approval because the lender is saying they approve the lending criteria of the application but still need to validate the value of the underlying asset. The lender’s valuation is often the final hurdle in the process because it is in their interest to be conservative on the value of the asset in case they are forced to step in and sell it. The value of the underlying asset must meet the minimum required by the lender or you need to have sufficient funds to cover the shortfall.
At this stage there are other key elements that you need to be aware of.
Lenders Mortgage Insurance (LMI)
If the loan is over 80% LVR (loan to value ratio), in other words, you are applying to borrow more than 80% of the lender’s valuation (not the purchase price) then you may require LMI. The mortgage insurer will need to issue insurance to the bank to cover the amount that is the difference between your deposit and the amount above the 80% LVR of the lender’s valuation. Simply put, the lender will only lend 80% of its own valuation of the property. This is in case you default on the loan and the property has to be sold by the lender. They reduce their risk to a downturn in the market by only having to recoup 80% of the value of the asset if sold. If you need to borrow more than 80% of the value of the asset you will need to take out a policy that will repay the amount to the lender that is above 80%. The insurance is only on the amount that you borrow over that 80% level so any funds (deposit) that you have will reduce the LMI amount.
The ‘cooling off’ period
This varies from state to state and is stipulated in your contract. Extensions to the period can be negotiated and are very common. Never waive your cooling off option without discussing it with your solicitor and us. It is through this period that we move from conditional approval to unconditional approval; however lenders make no commitment to provide an approval within the cooling off period. When the market is very active, some lenders may take 5 days just to arrange their valuation. If you have a pre-approval in place prior to entering into the contract your chances are greatly improved. You can see why we said to get your stuff together right at the start because, once the cooling off period expires you must either proceed or withdraw from the deal. It would be very inadvisable to continue with a sale contract without having finance approval.
When all stated conditions are met (i.e. the valuation, LMI, etc) then the lender will issue unconditional approval.
When your loan is unconditionally approved, the lender instructs their lawyers to prepare the mortgage contract. The loan documents are issued and accepted by you and the settlement is usually coordinated between your legal representative and the lender.
Through the settlement period you need to read the loan documents carefully and ensure they are correct. Again diligence is required here to ensure there are no delays at settlement. Check things like: the name/s appearing on the contract of sale is exactly the same as the name/s used for the applicants on the loan documents; the terms of the loan are correct; the interest rate and type is correct; the loan amount is correct; and the LMI (if applicable) is calculated correctly and so on.
Remember, the mortgage document is a contract and as such it advisable that you seek legal advice to fully understand the obligations you’re committing to in the terms of the contract. We will assist you with clarification on interest rates and fees etc, however we strongly advise you to seek professional legal advice on the terms of the mortgage contract.
When signing the document, pay close attention to ensure you sign all the areas where required and with the appropriate witness signatures. Any incorrect or missed signatures will delay settlement and possibly result in new documents needing to be issued. When you have everything in order, return all documents that are not indicated as ‘clients copy’ directly to the lender.
The entire process will typically take 4 to 6 weeks. If there are any changes in your lifestyle (employment etc) through the settlement period, let us know a.s.a.p.
When settlement takes place the funds are released and your new accounts are activated.
You are on your way to wherever you want to go!
If you have any questions about making a loan application, please contact us. We will be happy to help!