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How to apply for a home loan

Buying your own home is one of the most important financial decisions you'll ever make.

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If you're thinking about taking the plunge into home ownership, here's what you need to know about how to apply for a home loan.

Eligibility and requirements for home loans

Before anything else, check loan eligibility before applying. Lenders have their own requirements and policies depending on the loans they provide. Save yourself time and effort; see if you meet the basic requirements before you go through the whole loan application process.

First, you have to make sure you’re eligible to apply for and get a loan. Common loan eligibility include:

  • Must be at least 18 years old.
  • Must be an Australian citizen or permanent resident.
  • If not an Australian citizen or permanent resident, must be in a de facto relationship or married to an Australian citizen or permanent resident.

Lenders also require documents to help them determine whether they should approve your loan application or not. These requirements are:

  • Personal details
  • Property details
  • Proof of income
  • Proof of employment
  • List of assets and liabilities
  • Credit score
  • Any existing loans or debt

You may also be required to provide additional information depending on the lender and the type of loan you’re applying for.

What you need to do when applying for a home loan

Here is a quick rundown of how to apply for a home loan:

1. Get all your documents sorted

Applying for a home loan is much easier when you have all the required documents ready to go. The requirements may vary depending on the type of buyer you are, but generally it will include:

  • Identification requirements

    • Primary IDs like passport, driver's license, state or territory-issued photo ID card (such as Proof of Age card).

    • Secondary IDs such as birth certificate, Medicare card, citizenship certificate, utility bills in your name and current address, tax assessment notice, and debit or credit card in your name. If you can’t provide any primary IDs, you can present two forms of secondary ID.

  • Proof of income

    • For employees these include recent payslips, bank statements, employment contract, or an employment letter from your employer.

    • For self-employed individuals, present two years’ worth of business and personal tax returns and Australian Tax Office (ATO) assessments.

    • For those who earn rental property income, provide a letter from your real estate agent confirming your rental income, a copy of your current Residential Tenancy Agreement, and bank statements that indicate the rent payments.

    • Other sources of income such as dividends, superannuation, foreign income or other government income sources.

  • Assets and liabilities

    • Assets such as cars, share investments, term deposits, and anything you own of value.

    • Liabilities like credit card debt, ongoing loan payments, and the like.

  • Extra documents

    • If you are a first-home buyer, you could benefit from the First Home Owner Grant (FHOG). Make sure your FHOG application is completed to reap the benefits for your loan.

    • If you are applying for a home loan with a guarantor, your guarantor will need to provide all documentation for their identification, income, assets and liabilities.

    • If you already have insurance on the property, provide a copy of the insurance policy.

Prepare these documents before starting the loan application process. You do not want your application delayed because you forgot to pass a simple document.

2. Pre-qualify for your loan

Before you even start checking out the online property advertisements, you should pre-qualify with a lender to get a general idea of how much you might be able to borrow based on your income.

With loans.com.au , you can do this by filling out a short online form which only takes a couple of minutes. You will get an onscreen answer plus an email. This step helps you find out what you can actually borrow.

3. Get preliminary approval

To get preliminary approval from loans.com.au , schedule a quick 20- to 40-minute phone call with one of our lending specialists. After the call, you will have your application submitted to the lending manager.

No supporting documents are submitted at this stage. You will receive an email confirming preliminary approval. Preliminary approval indicates that you have a good prospect of being approved for a home loan up to a specified dollar limit.

Preliminary approval is not a guarantee you will be approved for a loan. However, once you receive the preliminary approval for a home loan, you can start house hunting with a clear budget in mind.

4. Receive conditional approval

For your loan application to progress past preliminary approval, you will need to provide documentation on your assets, income, expenses and liabilities. The lender will conduct a credit check to assess your credit record.

The lender will look at your ability to borrow funds and service the debt. If you are successful, you will receive conditional approval. This is still subject to a property valuation and no changes in your financial circumstances.

5. Lender will do a security assessment

After conditional approval has been granted, the lender will get a valuation of the property you wish to buy. The lender has to make sure your home loan is not too large compared to the value of the property. This is because the home becomes collateral for the loan.

6. Get Lenders Mortgage Insurance (LMI)

Depending on the size of your deposit, you may be required to pay for LMI. If your loan to value ratio (LVR) is over 80%, the application will then be passed on to a mortgage insurer and is subject to further credit checks.

7. Receive final approval

Final approval is when the lender has everything they need and can confirm they are willing to approve your loan. If so, they will issue a letter confirming their approval.

If your home loan application is more complex or you haven't provided all the necessary documents, there may be a bit of back and forth with the lender before they can finalise approval.

8. Loan offer is issued

Once you have been unconditionally approved for the loan, your loan offer will be issued to you. The lender will send you the loan contract that you will need to sign to accept their offer. You can go through this contract with a solicitor if you want to receive legal advice.

Once you have signed off on the contract, return it to the lender as soon as possible with any requirements needed to settle the loan. The sooner you do this, the fewer delays at settlement.

9. Settlement

Congratulations! You have reached the settlement stage. The settlement stage is where all the financial and legal loose ends are tied up, and the property ownership is transferred from the previous owner to you.

The final settlement meetings for the property purchase typically occurs between the representatives of the buyers and sellers, so you don't normally need to attend. The settlement agent will typically meet with your lender and the seller's representatives to review, exchange and sign all the documents.

The lender then withdraws the money from the buyer's nominated account and pays the seller.

The title office then receives the signed documents and registers the new owner of the property (you!). After settlement occurs, you can pick up the keys to your new home. A month after settlement is when you will typically begin making your home loan repayments.

If you are refinancing, settlement is when your loan is transferred from your previous lender to your new lender. Your new lender will guide you through the final processes of your loan refinance. Once your current lender is given the date of settlement, your new lender will pay out your old loan. After, you can start repayments on your new loan.

How to apply for a home loan online

Yes, you can apply for a mortgage online!At loans.com.au , you canapply and get approved for a loan fully online. No need to go to the lender’s office or file mountains of paperwork. Everything you need to do can be done through a convenient app.

With the onTrack online app, you can apply for a loan through your phone or computer. Using onTrack, you can apply for a home loan in three easy steps.

Step 1: Activate your onTrack account

Go online to the onTrack login page or download the app to create your account. You will be asked to enter a password to activate your account.

Step 2: Upload documents and details

Once you have activated your account, you can now upload documents such as payslips, bank statements, personal information, assets and liabilities and the like. The intuitive user-interface means you won’t have trouble figuring out what to do next.

If you do have any questions or need help, you can send a message or talk to one of our support agents through the online chat anytime. You can come back to your application whenever you want.

Step 3: Schedule a meeting with one of our lending specialists

After you have submitted all the required information, you will be prompted to set an appointment with one of our lending specialist managers. You’ll be able to discuss the different types of loans available and which one is the best for your situation.

You can also keep track of your application with onTrack. From application to approval to settlement, you’ll know what stage your loan application is in at all times. Everything you need for your loan is all in one place with onTrack.

Apply for a home loan today!

The online application takes only a few minutes to complete—apply here! Learn more about our home loan application process or book an appointment with one of our friendly lending specialists.

Apply now


What do I need to do when looking for home loans?

Don't just apply for the first loan you see. Do your research on what home loan would best suit your home buying situation. Take into account factors like fees, the interest rate and features that apply to the loan.

What are lenders looking for in my application?

Lenders will want to see your proof of income to make sure you can actually afford the mortgage repayments. If you're employed, this will include evidence of pay slips and proof of employment.

You can also use a borrowing power calculator to determine how much you can borrow. It will base your lending capacity on your income, expenses, debts, number of dependents, and whether you’re buying by yourself or with somebody else.

What is my credit rating?

Your credit score is extremely important as a lender they will look into your credit history to assess your ability to repay a loan and it may influence how much a lender is willing to give you as a borrower. Having a low credit score may be viewed by lenders as being a bigger risk as it can indicate your inability to meet repayments.

Before you apply for a home loan, make sure you check your credit rating. You can do this for free through the three main credit reporting agencies: Equifax, Dun & Bradstreet, and Experian.

Why do I need to have a strong savings history?

When applying for a home loan, you will need to prove that you don't just spend everything you earn. If you do, you will find it very hard to be accepted for a home loan because the lender will be concerned that you will be unable to meet repayments.

How much should I save for a deposit?

The more deposit you have saved, the better. While some lenders will lend against a 5% deposit, the ideal amount is 20% or more to strengthen your home loan application and improve your chances of being approved. In addition, if you can save up more than 20% you can avoid paying Lender’s Mortgage Insurance, and potentially get a lower interest rate.

About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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