Ever wondered what happens behind the scenes with your home loan application

Ever wondered what happens behind the scenes with your home loan application?  If so, read on…

As soon as your offer has been accepted by the seller, let your Better Choice Mortgage Broker know.  Better Choice Brokers are available around the clock and are happy for your text or email at unusual hours and even phone calls (maybe not at 3.00 in the morning ☹)

So, what next?

• Arrange a meeting with your Better Choice Broker and have the Offer & Acceptance (contract of sale) forwarded to your broker ASAP
• Your Broker will immediately order a valuation on the property.  Most of the time the automated system will request a valuation of one form or another, at other times the system will be happy to rely upon the sell price agreed to.    If the system requires a valuation, then the valuation may take the form of
• Software generated valuation.  A valuation that relies upon geographical sales evidence available online.  Little if any human involvement.
• A desktop valuation – again this does rely upon online geographical sales evidence, but there is human involvement.
• A drive by valuation – also known as a kerbside valuation.  A licenced valuer actually visits the property but does not enter the property.
• Full valuation – a licenced valuer visits and enters the property.

After ordering the valuation, and after meeting with you, your Better Choice Mortgage Broker will start putting your application together for submission to the lender.

Your Broker will actually prepare a submission for the lender covering off such points as

• Loan parameters
• Employment
• Income
• Other lending commitments
• Security property
• General background

Once the broker has set out the submission, he/she will hand off to an administration person who will enter your home loan application online.

Everything we do now is electronic. 

Long gone are the days when we used to fax the application to the lender.  Every part of the loan application process ‘feeds off’ what we enter online.

You and your loan’s particulars are simultaneously entered into Better Choice’s database and the lenders data base.

At this point your broker will cross reference the information you have supplied with the information required by the lender.  If there is anything missing your broker will request it from you.

There is no point submitting your application to the lender if there is missing information.  If your application is incomplete the lender will defer the application.  This wastes everybody’s time.

Once the valuation is back, you have supplied any missing information, your application is entered online and your submission is prepared, your application is electronically sent to the lender.

At the same time the information you have provided, payslips, bank statements, etc is scanned and emailed to the lender.

Credit scoring

As soon as we hit the ‘Submit’ button, in the background the software is ‘Credit scoring” your application.  That is, the system is ascertaining your responses to the questions within the application, e.g. age, time at address, time in employment, your assets versus your liabilities. 

If the software ‘likes’ your answers to the questions within the application, it allocates ‘points’.  If the answers are not ideal, then the software deducts points.

Once the software has completed the assessment of your application it will tally up the points and assess whether your application has passed credit scoring.

If your application has passed, then your application is conditionally approved.

If your application has failed, then your application is declined.

If your application is declined due to credit scoring, we can appeal the decision and provide the lender with more information.  We may be able to get the decision overturned; it depends on why the application is failing credit scoring

Conditional approval

Generally, your application is “conditionally” approved (and not unconditionally approved) due to missing information.  That is, your application is assessed by both the software and a human and on the main lending components of income and security etc your application meets policy.

The conditions outstanding may be something like the lender is missing a bank statement of yours or the lender wants to perform an employment check.

It is important that when your Better Choice Broker tells you that your application is conditionally approved but we need a little more info, that you get that info to the Broker ASAP.

Once we have supplied the outstanding conditions to the lender, the lender issues formal/unconditional finance approval.  That is, your application is all approved and free of any conditions, apart from standard normal terms and conditions, e.g. signing the loan contract.

Formal finance approval

When your broker has your formal finance approval, they will review it as to its accuracy and they will seek your permission to send it to the real estate agent and your conveyancer.

Once we have supplied the lender with the “transfer of land” (if you are purchasing) they will begin preparing the loan contract, mortgage docs and other supporting docs such as direct debits etc.

If you are a first home buyer it is at this point that we send your first home buyer grant application to the bank.

The lender will issue the loan contract and other documents (electronical issuance and electronical signatures are becoming more common place).

You sign these documents and return them to the lender.

At this point the lender will request confirmation that the property they are putting their mortgage on is insured.  You will have to provide your broker a “Certificate of Currency” confirming the property is structurally insured and the lender will be noted on the policy.

The signed mortgage documents are returned to the lender in a timely fashion.

On receipt of the signed loan contract, etc the lender will review the docs to ensure they have been signed correctly.

Once the docs have been passed as correct your application is ready to settle, the lender will contact your conveyancer/settlement agent to provide a mutually convenient time to settle your application and the property passes into your name.

Timeframe

In the main, the main whole process can be completed in approximately 6 weeks and please allow at least this amount of time when completing a contract to purchase. 

It can be done in a shorter period of time, but we do not recommend that your commit to the process taking any less than 6-7 weeks.

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