When you get to work on the requirements, a mortgage or home loan application may seem to need an infinite amount of paperwork.
However, your home loan provider is also required to conduct due diligence before they can approve a mortgage application. They have to confirm your ability to make loan repayments based on your present financial situation. They need details and documentation regarding your earnings and expenses before they can grant a home loan in Australia.
Finding out about and organising the required documents before you begin your application can help speed up the home loan approval process.
Below is a list of the common requirements and acceptable documents for lenders.
1. Proof of identity
Mortgage providers need to verify you are who you claim to be. For this, you’ll be required to provide at least one primary document or two secondary documents.
- Primary documents: Australian or foreign passport, Australian driver’s licence or learner permit
- Secondary documents: Australian birth or citizenship certificate, Medicare card, Australian Taxation Office (ATO) assessment notice (less than a year old)
If you have an existing bank account with your lender, you may skip the ID process. In case you’re applying jointly with a partner who doesn’t bank with your lender, they may be asked to provide proof of identity.
2. Proof of income
To determine how much you can afford to pay per month, your home loan provider will need documents that state how much you earn on a regular basis.
- Salary or wages: Last three months’ bank account statements showing salary credits, payslips, employment contract or letter stating your employment status and salary, tax return and ATO Notice of Assessment (below 18 months old)
- Government income: Bank account statements stating payment credits, Centrelink letter mentioning your payment
- Income as a self-employed individual: Tax return and ATO Notice of Assessment (below 18 months old)
3. Proof of financial status or position
When evaluating your application, the lender will consider your total financial situation. This means that your lender is interested in knowing whether you have any assets and existing debts that are of significant value (liabilities).
- Assets: Superannuation, stocks or shares, jewellery, real estate, etc.
- Liabilities: Car or personal loans, credit card debt, etc.
You’ll also be asked to provide a detailed breakdown of your living expenses per month. This way, they can ensure you have enough cash to fund your mortgage repayments.
These living expenses include transport-related costs, groceries, children’s schooling and childcare services, utility bills, insurance, cable, phone and internet, etc.
To get a fair idea of the amount you’re likely to receive, you can use the data from your income and financial status paperwork with a home loan calculator.
Ask your home loan provider
In general, lenders ask for similar documentation. However, it’s best to double-check the requirements with your bank lender or mortgage broker.
Once you get confirmation, you can start preparing the paperwork and be ready when your lender asks for it.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.