Buying a house is exciting but there may be several hoops to jump through, especially if you’re preparing a home loan application
Most lenders have strict eligibility criteria for home loan approval. Apart from reviewing your credit score, they require you to provide several documents to prove whether you’ll be able to repay the loan. They’ll also look at your expenses to ensure you can comfortably repay the loan without compromising too much on your general lifestyle.
For this purpose, a lender may require a host of documents when you apply for a loan. These include your identity proofs like your passport and driving license and income proofs, such as your bank statements and pay slips. You may need to provide some other documents based on your personal situation and the type of loan you’re taking out. For example, you will need a different set of documents when applying for a low-deposit home loan than a low-doc loan.
Here’s a list of documents you’ll most likely need to support your home loan application:
It helps to have at least one of the following documents meeting the 100-point identification criteria.
- Birth Certificate
- Driving License
In case you don’t have any of the above documents, you could use some of these secondary documents to prove your identity to the lender.
- Citizenship certificate
- Centrelink Pension Card
- Medicare card
- Health Care card
- Utility bill (not older than 3 months)
- Tax assessment notice (not older than 12 months)
Proof of Income
Lenders want to know how much you earn to determine whether you’ll be able to repay the loan. To prove your income as a salaried person, you could use some of the following documents:
- Three most recent salary slips
- Bank statements for the last six months
- Payment summary or Group Certificate from employer
- Letter from the employer mentioning the tenure of service
- Latest tax return (for the past 3 consecutive years in the case of self-employed individuals)
If you earn additional income apart from your salary, you may want to disclose it to make your application stronger. If you have rental income, provide the following information to substantiate it:
- A copy of the signed lease agreement and the recent rental agreement
- Bank statement showing rental credits for the last three months
- Latest tax return for the period
Make sure to include relevant documentation to support any other income, such as income from interest, pension, superannuation, foreign income or any other.
Understanding your living expenses can give the lender an idea of whether you’ve enough left at the end of the month to service a mortgage. While your bank statements provide an overview of your regular expenses, you may also need to provide a detailed breakdown of your living expenses, including how much you spend on items like groceries, utility bills, various subscriptions, education and health care.
Apart from identification and income proofs, you may need some additional documents, such as:
- Bank statements showing evidence of deposit and at least three months of genuine savings
- A list of your assets and liabilities
- Declaration letter to substantiate any funds gifted for the purchase
- Copies of most recent credit card statements mentioning the credit limit
- Copy of the contract of sale for the property (specific pages of the contract must be attached depending on your State)
- For construction loans, a copy of the building contract or tender and council-approved plans must be provided
Documents you may need for different types of home loan applications
Low-doc home loans
If you’re self-employed, it could be difficult for you to provide pay slips to qualify for a traditional loan. In such cases, you may apply for a low-doc loan with alternative proofs of income, such as:
- Self-certified income statements or Business Activity Statement (BAS) for at least 12 months
- Registered business name and ABN
- Tax assessment by the ATO for the past 3 years
Low Deposit Home Loans
Saving a 20% deposit isn’t always easy but there might be options for you if you wish to enter the property market sooner. Some lenders allow you to borrow up to 90% of a property’s price if you agree to pay for Lenders Mortgage Insurance.
In case you could get a parent or a close relative to guarantee your loan, you may be able to borrow up to the full value of the property. If you’re taking out a guarantor home loan, you’ll need some documents from the guarantor to support the application. These may include:
- Identification proof of the guarantor (as listed for the borrowers at the beginning of the checklist)
- Council rates notice for the property to be used as security for the guarantee
- Documentation for any existing loan on the property
Your parents may choose to gift you a deposit instead of guaranteeing your loan. Make sure you discuss this with your mortgage broker or a legal professional and have a letter executed to substantiate the nature of the gift. The letter should state that the money given to you towards your deposit is a gift and you’re not expected to repay it.
Help is at hand!
If you’re feeling overwhelmed with the home loan application process, feel free to connect with a mortgage broker for expert guidance on your journey.
A mortgage broker could help you fill out your home loan application and double check no essential document is missing. They can also guide you to the right type of mortgage for your situation with competitive rates. Speak to a mortgage broker or have your queries addressed by a Hashching expert to confidently navigate the world of mortgages.
By Vidhu Bajaj
Hashching Content Writer