How to apply for a home loan

We have put together a five-point checklist to follow when applying for a home loan.

1. 100-point check

If you are getting a home loan for the first time, you will firstly need to be "identified". That is, you will need to show identification up to the value of 100 points. A driver's licence earns 40 points, a credit card can earn 25 points and a birth certificate 70 points. Only original documents qualify.

2. Questions lenders ask

It is not unusual for a home loan application form to take up to 10 pages. There are four main points mortgage lenders look for:

• Your capacity to repay

• Are you a good financial risk?

• What is your collateral? Is the property you are buying adequate security for the money you are borrowing

• What are your existing assets? Some of the questions you can expect to be asked include:

• Number of dependent children

• How long have you lived at your current address?

• What do you owe and own?

• Your accountant's details

• Your personal insurance

• Number of credit cards, debts and limits

3. What you need to show

To speed up the home loan process, it is recommended that you take the following documents with you to your meeting with a mortgage broker:

• At least the two most recent pay slips, and group certificates for the past two years.

• A letter(s) from your employer(s) detailing income (for the past two years) and length of employment

• If you are self-employed:

• Past two years' tax returns and your accountant's details, or past two years' financial statements and your accountant's details.

• Some institutions may even ask for a profit and loss statement certified by a registered accountant.

Saving details:

• Bank statements including transaction, saving or passbook accounts.

• Investment papers including managed funds or term deposits.

• What you owe and own.

• Details of personal loans, credit cards or charge cards. Up to six months of statements should be produced to support these loans.

• Tax liability (if self-employed).

• Life insurance policy details

• Superannuation details.

• Approximate value of other assets such as furniture and jewellery.

4. How much can you borrow?

The amount you can borrow depends on what you are buying and how much money you have left when you take out all your fixed commitments from your net income.

If you are buying a home, most mortgage lenders will let you borrow up to 80% of the purchase price, or 95% if you are willing to take on mortgage insurance. Mortgage insurance is designed to protect the mortgage lender and not you. Please use our finance calculators to help you determine your borrowing capacity. However, please note that these calculators will only give you an indication of how much you can borrow and is not true amount of what the bank may lend you.

5. Payment timeline

There is more to buying a home than the deposit. Remember to also factor in the fees and charges applicable to a home loan, including:

• Stamp duty

• Mortgage insurance

• Legal fees

• Pest and termite inspection

• Loan application fees

• Loan establishment fees

• Service fees

• Valuation fees

• Account transaction fees

• Exit fees (or deferred establishment fees)

Many fees and charges depend on the amount you borrow and the price of the property.

You won't have to worry about going through the home loan process alone. A mortgage broker from Intellichoice is on hand to help you through the whole process and answer any queries you may have. You can be assured that we will explain everything in plain English and that you understand the terms and conditions. Please do not hesitate to contact us on 1300 55 10 45 for more information on getting your first home loan.