Approving a home loan can be a short and simple or a long and complex process, depending on your application and your financial situation. While the average time from home loan application to formal approval and settlement can take four to six weeks, some mortgage lenders advertise that they can approve a home loan in as little as 10 minutes.
How can you get home loan approval fast?
The more work a lender has to do to verify a home loan application, the longer it can take to get approved. Simpler, more straightforward applications may take less time to get a tick. The closer you are to an “ideal” borrower, the faster a lender will be able to approve your mortgage application.
Different lenders have different borrowing criteria, but often look for:
- Payslips showing solid and stable income from a stable full-time job that you have had for some time
- A deposit of 20% or more made up of real savings, such as money earned from your work and placed in a savings account or a term deposit
- Bank statements showing reasonable household expenses
- Buy an established property
- Buying a house to live in as an owner occupant
- An excellent credit rating
A relatively simple home loan application could receive pre-approval in an hour and formal approval in one to three days in some cases.
Some new mortgage lenders and fintechs such as Unloan claim to be able to use technology to approve home loan applications in as little as 10 minutes. Of course, this requires a borrower to meet the eligibility criteria of these lenders, so access to these fast turnaround times might be limited. For example, at the time of its launch, Unloan was limited to only borrowers refinancing existing home loans and did not offer conditional approvals or home loans for new purchases.
What’s Slowing Down Home Loan Approvals?
If a lender has to spend a lot of time and energy verifying the details of an application, approval may take longer. Lenders need to assess whether you can afford to repay the home loan, whether your debt-to-equity ratio is too high, and the risk that you will find yourself in financial difficulty. Lenders also need to consider their own financial risk, such as whether the value of the property will be sufficient to secure the loan in case you end up defaulting on your repayments.
Some of the factors that can complicate a home loan application and lengthen the approval time include:
- Borrow more than 80% of the value of the property, requiring Lenders Mortgage Insurance (LMI)
- Paying a deposit with money that is not a real savings
- Apply for a large home loan, for example over $2 million
- You already owe money on car loans, credit cards, etc.
- Borrow with a guarantor
- Buying something other than a typical established property e.g. off-plan property, rural property, vacant land, heritage listed property, etc.
- Your income from sources other than full-time employment, such as self-employment, investments, etc.
- Be in a new job and still on probation
- Buying a property that requires a full appraisal
- Buying a property to rent it out as an investor
- Applying with a bad credit rating
If you are unsure whether you can get a home loan application approved in a timely manner, or would like assistance in obtaining your documents for a more efficient home loan application, you may consider contacting a mortgage broker.