Quick guide on how to apply for a home loan

couple on a bed with a laptop researching how to apply for a home loan.

Want to apply for a home loan but don’t know where to start or what to do? No worries, we will walk you through it!

Before applying for a home loan, you need to understand why you need one. The majority of home buyers don’t have the funds to purchase a home at its full market price and usually they must get extra finance from a bank or lender. This financial agreement between you and the lender is called a home loan (or mortgage) and it makes up the difference between the buyer’s deposit and the price of the property.

When to apply for a home loan?

If you’re thinking about applying for a home loan there is a quick checklist you need to tick off first.

Step 1: Figure out how much you can borrow.

By using our borrowing calculator you will be able to have a general idea of how much you can borrow based on your annual income.

Step 2: Have a home loan deposit saved up

The recommended standard home loan deposit is 20% of the cost of the property. This deposit might take a couple of years to save up, especially in Australia, where the median house price is close to $1 million. 

Step 3: See if you’re eligible for home loan grants

Don’t lose heart if you’re a first time home buyer, each state and territory offers first home owner grants that may help you reach your goal. 

Step 4: Check your credit history

Home loan lenders use credit scores to assess you for pre-approval and to check if you will be risky to lend to. If you are rejected for a home loan pre-approval that rejection will show up on your credit report, making it a bit more difficult to get approved by other lenders. To avoid this make sure to get a copy of your credit report for free online. Check for any mistakes and fix any red marks against your name.

After completing all these steps, you are ready to apply for a home loan.

How do you apply for a home loan?

While the task may sound daunting, applying for a home loan is pretty straightforward.

Step 1: Decide on the home loan type you want

The type of home loan you pick will dictate the kind of interest rate you will have in your home loan.

  • Fixed interest rate: A fixed rate home loan has the same rate locked in for a certain time period, meaning that the rate will stay the same no matter what happens in the housing market (good or bad). 
  • Variable interest rate: On the other hand, variable home loans change according to the market. This option is popular among home buyers due to features like offset accounts and extra repayment facilities.
  • Split rate loan: Just like the name suggests, a split loan rate gives you a mix of fixed and variable rates, giving you the best of both worlds.

Step 2: Compare home loan deals

There are hundreds of home loans out there, so make sure you do your research and don’t fall into the trap of getting a home loan just because it’s the bank you’ve been with for ages. Sometimes your personal bank might not be what suits your specific needs. 

Check out Mozo’s comparison home loan guides:

Step 3: Create a short list

Once you’ve compared several home loans, you should create a home loans short list that you’d like to inspect closer. Using our home loan comparison calculator you’ll be able to compare home loans side by side to see which loans might be cheaper when it comes to interest and what features they come with (e.g. redraw facility, offset account, extra repayments facility).

Step 4: Apply for a home loan pre-approval

When you finally know what home loan is best for you, it is time to apply for a home loan pre-approval. With a pre-approval you can make a ‘conditional’ offer on a property. While a pre-approval is a strong indication that you’ll likely be approved for a home loan, it does not mean it has been approved.

How to get approval for a home loan?

As mentioned, getting conditional approval is useful but it’s not a guarantee. When you’re completely ready, you’ll need to answer a number of questions and disclose important financial information in writing. So, before doing all this, check your finances and ensure you can demonstrate consistent patterns in spending and saving.

Step 1: Don’t make any lifestyle changes

No major purchases. No job change. No excessive spending. Any sudden changes in your lifestyle (even positive ones) could affect your chances of getting approval for your home loan. After getting your new home, maybe revisit all the things you had to put on hold.

Step 2: Provide the lender with borrowing details

Make sure that you provide your lender of choice with all the correct, up-to-date and necessary information during your pre-approval. That way there will be little delay and you can start home shopping sooner rather than later.

What are the documents needed for a home loan application?

Step 1:  Organise your documents

Some important documents you typically may need to have when applying for a home loan:

  • Proof of identification
  • Proof of employment
  • Extra income and assets
  • Expenses
  • Debts (credit cards, car loans, personal loans)
  • Signed contract of sale (unless applying for pre-approval)
  • Insurance
  • Deposit or grant help letters
  • Conveyancer or solicitor’s details

Step 2: Submitting your application 

When you have everything ready and set up, fill out any necessary paperwork provided by your lender and attach/scan all your documents. In some cases, you may be required to have a witness, like a Justice of Peace to certify your signatures or copies of documents. So double check all your lender’s requirements before hitting the submit button.

I applied for a home loan, now what?

Step 1: Lender assesses property

Once your lender has assessed the property, your home loan approval will come through - assuming they are happy with the offer you made on the property  (i.e you haven’t overpaid its market value).

Step 2: Pop the bubbly

Congratulations, you applied for a home loan and got a new house!

Home loan comparisons on Mozo - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.variable for 24 months and then 2.25% p.a. variable
    2.21% p.a.

    New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

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    Details
  • placeholder
    Mozo Experts Choice 2021
    UHomeLoan - Discount Offer

    Owner Occupier, Principal & Interest

    interest rate
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    Initial monthly repayment
    2.19% p.a. variable
    2.19% p.a.

    Enjoy a super low rate. $0 fees to consider. Fast and easy online application. Free redraw and free extra repayments. Flexible payment terms. Min 20% deposit required.

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    Details
  • placeholder
    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

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    Details
  • placeholder
    Variable Home Loan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Refinance only. Super-fast digital application process. Zero upfront fees. No on-going service fees. Free 100% offset sub account. Minimum 25% deposit required.

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    Details
  • placeholder
    Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.14% p.a. variable
    2.14% p.a.

    Competitive low variable rate. No application or account management fees. Flexibility to split your loan and set different repayment types. Fee free withdrawals of your savings.

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    Details
  • placeholder
    Mozo Experts Choice 2021
    Variable Home Loan Special

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    2.02% p.a.

    Yard’s low-rate variable special home loan is packed with all features – unlimited additional repayments, free redraw, 100% offset account. Enjoy a simple online application. Special rate applies to home loan applications submitted by 31st January 2022. Low Cost Home Loan winner in the Mozo's Experts Choice award 2021.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

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