Preparing the necessary financial and personal documents is key to ensuring that you and the lender make a wise financial decision by engaging in a home loan agreement.
In this article, we’ll walk you through the various types of home loan documents you can expect to encounter during the application process.
Understanding these documents will help streamline your application and make the path to your new home much smoother.
Why banks can be picky
Banks and other financial institutions can appear “picky” when approving loans for various reasons and in terms of the supporting documents. It’s essential to recognize that their primary goal is to minimise risk and protect their investments.
Each document must be up-to-date, readable, and able to back up the data you provided on your application.
Lenders want to be sure they are evaluating the situation correctly; otherwise, they risk approving or denying your loan based on inaccurate information.
What papers do banks need?
You will be required to present income documentation when asking for a loan, such as pay stubs, letters from employers, tax returns, or notices of assessment, as well as statements of your deposit and loan balances and even photo identification to verify your identity.
In addition to this, they may occasionally want more paperwork, like an accountant’s letter, a gift letter, a default explanation, or anything else they consider necessary.
Does each lender have unique rules and requirements?
Yes, every lender has the right to set their guidelines for lending. All lenders must comply with specific standards and rules, such as anti-discrimination laws and certain financial regulations; however, each lender may have different specific policies and requirements.
For the best loan deals, borrowers should shop around and assess offers from several lenders. What one bank could perceive as a “high-risk” borrower, another bank might view more favourably.
By looking at various possibilities, borrowers can frequently locate a lender whose standards match their objectives and financial position.
Additionally, using a mortgage broker can help buyers find lenders that are a good fit for their requirements because brokers know the lending market and can put borrowers in touch with appropriate lenders.
Standard Loan Documents Checklist
When borrowers apply for loans or credit from financial institutions, most banks and lenders require a common checklist of home loan application documents. These standard loan documents are a collection of essential legal and financial documents lenders use to assess your financial situation and borrowing capacity.
The terms and circumstances of the loan, the obligations of the lender and borrower, and legal protection for all parties are described in these documents.
A standard loan documents checklist might be useful to ensure you have all the required paperwork and documentation when applying for a loan. The particular paperwork needed will depend on the loan type and the lender’s policies. Still, the following is a list of standard loan documents you might need:
Basic Information Documents
You will need to submit the following paperwork for all loans:
- Short application form, which your mortgage broker will supply.
- You must provide up to three different forms of identification, including a driver’s licence, passport, and Medicare card.
The documentation you must next submit will vary based on your specific circumstances and the sort of loan you are looking for.
For instance, if you are buying a property and have a job, see the sections below on PAYG applicants and purchases. Please call one of our mortgage brokers at 1300 030 388 if you need help acquiring these papers.
Contract of sale (reference uses the term purchases)
A contract of sale, also known as a sales contract or purchase agreement, is a legally binding document that outlines the terms and circumstances of the sale of goods, services, or real estate between a buyer and a seller.
Applicants must include a copy of the purchase agreement unless they have already received approval. The information you must submit varies by state:
- Frontpage in NSW
- The first two pages in QLD
- Details page in VIC
- The first two pages of SA
- Offer & Acceptance (both pages) in Washington
- Frontpage in ACT
- All pages in NT
- Top page of TAZ
Best practice dictates that you should always give a copy of the entire sales contract since sometimes “special conditions to the contract” can affect whether you can get a home loan.
For instance, the property could be subject to a fixed-term tenancy, an easement, or a recorded complaint. In most cases, the first page only provides some of this information.
Find out more about what you should look for in a contract of sale and what can surprise you when buying a property. Additionally, you’ll need to present proof of your deposit:
Your savings account’s most current statement and a three-month transaction history.
Loan refinancing is replacing an existing loan with a new one that typically has better conditions. People frequently think about refinancing their loans to reach various financial objectives, including lowering monthly payments, cutting interest rates, or modifying the loan’s structure.
You will usually need to produce proof of all of your current debts, even if the specific requirements range significantly across various banks.
- The most recent statement and transaction history for your refinanced home loan for the previous six months.
Pay As You Go (PAYG) borrowers are those whose employer or other payers withhold or deduct their income taxes and other financial responsibilities before they receive their income.
Your broker will require the following if you are a PAYG borrower:
Two most recent payslips you have and the group certificate from the previous year is also optional.
Self-employed borrowers work for themselves, own and operate their businesses, or make a living as independent contractors or freelancers.
Self-employed people handle their finances, including income reporting and tax payments, unlike traditional employees who receive regular payslips with taxes deducted by their employers.
If you are self-employed, the documents required will depend upon the business structure you have set up.
For sole traders:
- The last 2 years’ individual tax returns & notice of assessments
- Its last 2 years’ partnership tax returns
- Individual tax returns & notice of assessments
- Its last 2 years of trusts/company tax returns
- Individual tax returns & notice of assessment
Call us at 1300 030 388 so that one of our brokers can explain in detail what the lender expects of you.
Specialist loans, often called non-standard or non-conforming loans, are financial tools for borrowers who need to fit the standard requirements for traditional loans provided by well-known lenders.
Guarantor Loan Documents
A guarantor loan is a lending arrangement where a second party, often known as the guarantor, takes on to repay the debt if the primary borrower defaults. Guarantor loan documents are the legal agreements and paperwork for this loan arrangement.
Your parents (or the guarantor) must provide the following information when you apply for a home loan with them as a cosigner:
- Completed brief application for a guarantor (sent to you by your broker).
- A driver’s license, passport or Medicare card.
- The council must be notified that the property will be guaranteed.
- One most recent mortgage statement for the property the guarantor owns (if applicable).
If guarantors have any questions, don’t hesitate to contact us at 1300 030 388.
Bad Credit documents
Specific paperwork could be needed during the application and approval processes for financial goods or services directed toward people with bad credit.
Lenders who issue loans, credit cards, or additional financial services to people with less-than-perfect credit histories frequently need further information to evaluate the risk and applicant’s financial status.
Your broker will need the following records to evaluate your application if you have bad marks on your credit report, such as defaults and judgments:
- If the default has just been settled, provide your broker proof of payment.
- Please submit all correspondence between you and the creditor or debt collection agency who filed the default if the default has been questioned or is still being debated.
Low-Doc Loan requirements
Low-documentation loans refer to a particular kind of mortgage or loan product made for borrowers who find it challenging to provide the necessary financial documents for standard loans. Self-employed borrowers with unique sources of income frequently use these loans.
You must give your broker the following information if you are unable to supply all of the income verification documentation required for a home loan application:
- Your ABN or Australian Business Number.
You will also need to present one piece of proof of your limited income. The three choices are your Business Activity Statements or BAS over the last 12 months, six months’ worth of bank statements for both your personal check account and main company account, and a letter that your accountant has signed confirming your income.
Temporary residents are required to provide the following:
- An exact copy of the email from the Department of Immigration confirming the approval of your visa.
- A clean copy of your passport.
- The page that contains the visa you currently have.
For Australians and other nationals who reside abroad, a photocopied passport is required, and you will also need to provide proof of your approval if you have a 457 visa. Before your loan is granted, giving evidence of FIRB approval could be necessary.
You can reach us at 1300 030 388 for your queries or worries.
An Australian retirement savings tool, a Self-Managed Superannuation Fund (SMSF), gives people more control over their retirement savings assets. SMSFs are subject to strict regulatory regulations and compliance standards established by the Australian Taxation Office (ATO) to ensure that they operate within the bounds of the law.
Your self-managed superannuation fund (SMSF) will need the following tax documents when you make a property purchase:
- A true copy of the trust agreement for the SMSF.
- A custodian trust deed certified copy (if the document is already set up).
- All associated organisations are supported by the Australian Taxation Office (ATO) Tax Agent Portal’s most recent two years’ worth of financial reports and income tax returns if the SMSF is already set up.
- Evidence demonstrating the ability to make specified super contributions, such as personal tax returns and pay stubs, for newly founded super funds.
- The most recent super fund statement for any funds you were a member of before your SMSF was established.
- Audited SMSF annual returns from the previous two years
- A letter from an accountant attesting to the trustee of the company’s non-operation.
How about trusts?
Asset security, inheritance planning, and tax reduction are just a few of the uses for trusts as legal entities.
The following documents must be provided for companies, family trusts, and unit trusts:
- Name and ABN of the trust or firm.
- A stamped copy of the trust deed
Construction loans are specialised financial tools that offer funding for building new homes or businesses or renovating existing ones. These loans are distinct from standard mortgages or loans for buying finished buildings.
Vacant land development
Turning undeveloped or unused property into a valuable and beneficial asset is called vacant land development. The contract of sale is typically sufficient proof to give your broker when buying a registered land block.
Suppose the land still needs to be registered. In that case, the contract will specify the anticipated date of registration as well as a design showing how the block will be divided.
The contract indicates a prospective lot number. Therefore, the lender can still approve the loan if the title information is delivered before the settlement.
Above all, offering as many specifics and building plan documents as possible is critical. This comprises:
- A formal written tender or a construction contract.
- Complete copies of the plans that the council approved.
- Finish/specs timetable provided by the builder.
- Before the start of construction, additional documents, such as the builders’ insurance, will be required.
- The documentation and proof needed for any building vary depending on the lender.
How a mortgage professional can help
When you are familiar with the different sorts of documentation needed, navigating the world of home loans can be more manageable. Every piece of documentation is essential during the loan approval process, ensuring that you and the lender are making informed decisions.
When collecting and submitting these documents, being well-prepared and organised will significantly speed up the approval procedure and move you one step closer to realising your dream of becoming a homeowner.
Are you prepared to look into your mortgage alternatives with professional guidance? Call us at 1300 030 388 or email us to arrange a consultation with a mortgage expert who can help you decide how to move toward homeownership.