How long does home loan approval take?

Home buying & selling, Melbourne
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Buying a home can be a nerve-wracking experience, what with the anticipation and uncertainty of the negotiation between you and the seller’s agent, coupled with a tense wait to see if you’ve been successful in securing the property at your desired price.

The reality is, however, that signing on the contract’s dotted line after offer and acceptance isn’t the end of the hard work – in fact, it’s just the beginning.

Buying a home does require a lot of waiting, more than most people realise, until they buy their first property!

The most common questions from first home buyer’s is either “How much can we borrow?” or “what’s my interest rate?” and both of these questions are easily answered based on the clients circumstances.

But arguably the most challenging period of all is the wait for your home loan application to be approved. That has been known to take between one to four days if you have all your paperwork in order, but this can often be longer with wait times at some lenders taking weeks and adding to the frustration and anxiety of buyers.

Homebuyers are typically focused on seeking clarity on the financial approval required and most buyers wonder how long the home loan approval will take and what happens during settlement.

What happens during settlement?

There’s no point in sugar-coating it. The reality is that buying a home does involve a lot of waiting. Many people say they are not good at waiting and find it a frustrating time.

Regardless, after your offer has been accepted, you’ll have ample opportunity to put your ‘waiting skills’ to the test.

You’ll wait for your building and pest inspection to be done, you’ll wait for your conveyancer to do the necessary checks and prepare the paperwork for transfer, you’ll wait whilst the bank does its own valuation on the property and then you’ll wait for the big one – the home loan approval.

In my experience, this is the one that makes clients most nervous.

Sometimes it can feel like a strange mix between a first date and a competitive job interview, where you put your absolute best foot forward and then hope to come out as a choice prospect.

So, how long does finance approval take? It’s one of the most common questions I get from clients when we submit their home loan paperwork.

Obtaining home loan approval can generally take between two to four days… but this isn’t always the case.

There are many factors which can see that timeframe blow out, causing delays in settlement and a bit of additional stress for you.

The good news? One of the most influential elements is in your control.

Home Loan Application Process

Gaining financial approval can be made a little less stressful by making the home loan (or mortgage) approval process go as smoothly – and quickly – as possible. It all comes down to understanding the home loan application process and being as thoroughly prepared as you can when you submit application documents to the lender.

It’s important to have all the required documents in order so that the bank can assess your position and be confident in your suitability as a borrower. It’s your most recent payslips, your latest notice of assessment from the tax office, your bank and credit card statements, details of any personal loans and your certified identification.

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An experienced mortgage broker can be worth their weight in gold in helping you understand the fine detail of the home loan application process and working with you to ensure your mortgage application contains everything you need to help your approval come through as quickly as possible.

Some factors which can cause a delay are employment centric. For example, if you’re a casual worker or a contractor, this will require some extra time to assess. The same goes for those who are self-employed.

Financiers traditionally apply more expectation and scrutiny to self-employed people around their business, profits, costs and most of all, the business’s ongoing sustainability. Of course, without profit and income then a self-employed borrower will struggle to meet their loan repayments.

There has been some good news for self-employed people in recent months, with the big four lenders announcing an easing of restrictions in the assessment process. Typically, self-employed borrowers have faced additional challenges gaining financial approval and this has made it harder to secure a home loan. But recent announcements indicate this process may be a little easier now – in the wake of the COVID-19 pandemic – as banks seek to bolster borrower numbers. 

That said, if you’re self-employed it may be longer than if you were a salaried wage earner to get your home loan approval.

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Factors that can slow down your application assessment

If you need mortgage insurance, because you’re borrowing more than 80 per cent of the value of the property, getting this sorted can cause a bit of a slowdown to your financial approval.

Sometimes, the property market or lending environment can cause delays too, adding days or weeks to the home loan approval time.

When the market is especially hot and the number of real estate transactions rise, lenders are inundated with mortgage applications and their assessors simply can’t get through them fast enough.

On the other end of the scale, when the market is a little slow, some banks tighten their belts and make changes to their workforces. So, while transactions might be down, so too are the number of assessors.

Regulatory changes can also cause delays as lenders get their heads around new rules and train their staff accordingly.

I’ve heard a couple of stories recently of some approvals taking 10 to 14 days to come through, but this is generally rare, and of course, if time is of the essence, then we simply avoid lenders with slow turnaround times.

How long does it take to get unconditional approval?

Some terminology that is often confusing for first-time buyers includes pre-approval, conditional and unconditional approval.

Understanding these terms can help you understand the application process and can also help you answer the question, how long does finance approval take.

Often, I find that once I begin explaining these terms, would-be buyers all want to know the same thing – ‘How long does it take to get unconditional approval?’

Generally speaking, pre-approval is also a conditional approval. It is an assessment indicator from the lender that confirms they have looked at your application and, at first glance, it all seems good. The assessment is conditional to further investigation into your suitability as a borrower. 

Your home loan approval time can be shortened if you have already achieved conditional approval. 

You can use this conditional approval (pre-approval) as a guide to how much you can spend and as an indicator that, if your circumstances are quite straightforward, you’ll likely be unconditionally approved in due course.

In the home buying process, I would encourage any would-be property buyers to seek pre-approval from a lender well in advance of starting their property search as this can alleviate some of that pent up stress when it comes time to buy.

It is one less thing to worry about as you navigate your home or investment search and it gives you, the buyer, a clear understanding of how much money you will have to spend.

It takes the grunt work out of the process. It gives certainty about not just how much you can spend, but that the settlement process will be straightforward from a lending perspective.

Pre-approval is the first step before getting unconditional approval. It can take up to a week to receive unconditional approval from the bank, longer if your situation has added complexities.

But don’t forget – a pre-approval generally lasts for three months. In many cases, if you need a little more time, it can be extended for a further three-month period.

The key takeaway is that to remove the stress and ensure your approval process is as seamless as possible, put your affairs in the hands of expert mortgage brokers like us.

Make it easier on yourself

I would encourage any would-be property buyers to seek pre-approval from a lender well in advance of starting their property search as this can alleviate some of that pent up stress when it comes time to buy.

It is one less thing to worry about as you navigate your home or investment search.

It takes the grunt work out of the process. It gives certainty about not just how much you can spend, but that the settlement process will be straight forward from a lending perspective.

But don’t forget – a pre-approval generally lasts for three months. In many cases, if you need a little more time, it can be extended for a further three-month period.

The key takeaway is that to remove the stress and ensure your approval process is as seamless as possible, put your affairs in the hands of expert mortgage brokers like us.

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The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.

Andrew Mirams

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