Does it take long to get a home loan in 2021?

Home loans are approved much faster now in 2021, say the leaders of some of Australia's biggest banks. Music to the ears of many would-be borrowers eager to jump into the busy property market, undoubtedly.

Loan approval times were a talking point at the House of Representatives Standing Committee on Economics this month, where chief executives from big banks NAB, CBA, Westpac and ANZ highlighted both the heat in the current market and expectations of continued price growth this year. This analysis led to the committee's queries over delayed loan approvals, given many prospective buyers have been forced to sit on the sidelines, tied up by lender's red tape processes.

In recent years, home loan approvals have lagged due to a cautious approach by lenders toward some applicants, especially in light of findings made by the Hayne Royal Commission. Within this stringent process of the last few years, however, some lenders have delayed the process perhaps more than needed. These delays were raised by the committee amid a currently heated market, where timing can be crucial to making a property purchase.

With many people looking to buy right now, lenders now seem acutely aware of helping more buyers get into the action with an approved home loan. For example, ANZ Bank's chief, Shayne Elliot said during the hearings, "Pleasingly, our loans to first home buyers over the last three months are up 75% on last year and, across the industry, those getting into property for the first time are taking out 35% of owner occupier loans."

Meanwhile, NAB boss Ross McEwan told the committee that his bank could give a green light to a vanilla home loan in as little as 24 hours. Specifically, he said that 50% of simple loans are approved in less than a day and the other 50% in less than five days, as reported by The Australian Financial Review.

Getting a home loan approved - what are the steps?

Borrowing a large sum of money such as a home loan requires obvious vetting. For example, after receiving your home loan application, lenders will typically follow a few routine checks and, depending on the completeness of your documentation and your history with the lender, this can take a few days or weeks. These checkpoints can include contacting you to talk through your application and help you to find a lending arrangement that suits you, doing a credit check (using a credit reporting body) and getting a valuation on the property you want to secure.

So, if you are just starting your property search, a pre-approved home loan might be a smarter move. According to the government’s Moneysmart site , getting pre-approved ahead of time can help you get into the market when you're actually ready to buy. This is clearly useful in a busy market when it's likely that you'll need extra time to find an affordable option.

In the pre-approved scenario, a lender will notably ask for evidence of your current financial situation, debts and credit history to assess your ability to repay the loan. Pre-approval usually lasts for 3–6 months and shows you're eligible to apply for a loan up to a certain amount. Now it doesn't commit you to a loan but does tell sellers you're serious about buying. It also helps you set an affordable price range.

Realistic expectations about borrowing money

Certainly anyone looking at the housing market right should try to be realistic about what they can afford. Lending standards have been top of mind for the government and home loan lenders of late, but the application of such rules appears to be loosening in 2021. While this might give some prospective borrowers a better chance to enter the property market, the emphasis of responsibility now falls more squarely on mortgagees.

As a result, taking the time to get your finances in order is not only a more responsible approach but one that can set you up for a more efficient and safe buying experience once you step into the property frenzy.

You can start researching our top home loan rates below or visit our home loans hub for even more options.