Just been given unconditional approval for your home loan?
The next step is to go through the loan agreement documents sent to you by the bank.
With help from your mortgage broker, sign and return these documents as quickly as possible to avoid delays in settlement.
What are loan offer documents?
The loan offer will arrive a week after you are given formal approval and will come in two accompanying documents.
The first document, the offer letter, will specify all of the aspects of your home loan including:
- The agreed loan amount.
- Annual interest rate.
- Your repayments on a monthly, fortnightly and weekly basis.
Accompanying the offer letter will be a detailed copy of the loan terms and conditions, the size of which can vary from a 5-page contract to a 100-page booklet depending on the lender.
The loan terms and conditions may also include a ‘checklist’ of extra supporting documents that you will be required to supply before the loan will be advanced.
If you’ve started a home loan application with us and have received your loan offer documents, stop!
Call one of our brokers on 1300 889 743 first and we can go through the documents with you to ensure no errors have been made by the bank.
Evidence of building insurance
The checklist may stipulate the requirement for building insurance. This requirement varies between the property type and purpose of the loan:
- Purchase / refinance: You need to obtain building insurance and provide evidence.
- Unit / townhouse: The strata corporation insures the building so no evidence is required.
- Vacant land: Insurance is not required.
If you need to provide evidence of building insurance, ask your insurer for a certificate of currency to be faxed to you and attach it to the signed loan agreement.
Make sure that you have insured your property for the minimum amount and included your lender on the policy before you request a certificate of currency.
For construction loans, the loan offer will need to be signed and returned as it would be for a purchase or refinance.
However, the bank will also ask for further evidence which will need to be provided by the builder. This includes council approved plans, his builders insurance and drawdown schedule.
Banks can be unreliable and can sometimes lose your documents. To avoid this and possibly delaying your settlement, ensure your signed loan agreement and any supporting documents are returned to the bank in one go.
Do you want to apply for a construction loan? Call us on 1300 889 743 or complete our free assessment form and we can explain the entire process.
Check for mistakes in the loan agreement
This stage of the home loan process is important because the lender can sometimes make errors, the most common of which being the misspelling of yours or your partner’s name or the address of the property that you are buying!
What can also happen on occasion is that the agreement shows the wrong interest rate or the fees that are applicable to your mortgage. These mistakes need to be identified and rectified before the loan funds are advanced.
Do I need legal advice?
You have the right to seek independent legal advice from a solicitor before signing the loan contract.
In most cases, this is optional and at your discretion. However, in such circumstances as a loan with a guarantor, SMSF loan or trust loan, the lender may request that you obtain legal advice and provide a certificate of legal advice signed by the solicitor.
The reason for this is that these loan products are complicated so the bank wants proof that an independent qualified person has explained the loan to you.
In most cases, a solicitor should not charge more than $300 to provide legal advice regarding a home loan contract.
Why a mortgage broker can help?
By sitting down with your mortgage broker or a solicitor to go through the contract you’ll know exactly what you’re committing to.
What makes having a broker essential is that they will make sure that the structure of the mortgage is accurate; something a solicitor won’t be able to check.
The reason is that our brokers will have quoted, in writing from the bank, aspects of the mortgage such as the amount you want to borrow, the interest rate and the mortgage fees applicable to your loan.
With this evidence, we can successfully dispute any discrepancy between the terms and conditions agreed upon at the pre-approval stage and what appears in the loan agreement.
Once you and your broker are happy with the loan offer, sign and return it. Ensure that you sign everywhere that needs to be signed and that your signatures are consistent!
It will normally take a few days for the bank to process your loan once it is returned, but during busy periods it can take a couple of weeks.
In addition, the loan documents have an expiry date which varies depending on the lender. That’s why it’s essential that you sign and return them as soon as possible.
Do you need independent legal advice for your loan agreement? Check out our list of recommended conveyancers for the state you live in.
When do you receive the loan agreement?
After you submit your home loan application, the lender will confirm that the information you have provided is accurate so you’re not overcommitted.
They may ask for more supporting documents and evidence based on your situation but once everything has been confirmed, the lender will issue you with an approval in principle.
This means your loan is basically approved subject to the fulfilment of certain conditions including a proper valuation of the property.
Once these details are confirmed, you will be given formal approval and it will take around a week for you to be sent the loan offer documents.
To better understand the steps to looking for a property, securing a home loan and how the settlement process works, check out our home buying process page.
When you’re ready to buy, get in touch with one of our expert mortgage brokers by calling 1300 889 743 or completing our free assessment form.
We can fix any of the bank’s mistakes and walk you through the loan offer process so you can avoid the stress!