Before you can start your home loan application you will need to have a few documents on hand to prove your identity, income, assets and liabilities.
Last week we started looking at the documentation required around verifying your identity and income. This week we will have a closer look at the documentation that will be required to support your assets and liabilities. Please note the documentation required to support a home loan application will vary depending on the lender, this is just an overview and not a comprehensive list.
Assets
You will need to prove your savings with bank statements, as well as be able to provide details and values of any other assets, such as cars, stock, term deposits and property.
Savings/Equity
The savings/equity must be held in the name of the borrower(s) and can include any of the following:
- Savings account(s)
- Term Deposit(s)
- Cash Management Account(s)
- Share
- Equity in existing residential property
In some cases Genuine Savings has to be demonstrated (don’t panic we will explore genuine savings and other concepts further in future posts). As a result the folowing may also be required:
- Statements or other records to show that you have held or accumulated the savings or equity over 3 months or more
- If the savings is a gift for example from your parents they will be required to provide a Statutory Declaration stating that the funds are a gift and you do not need to repay the money in the future.
Transaction Account
A transaction account is your main day to day banking account it is usually defined as the account that your salary is paid into and / or your main banking transactions occur. You may have more than one transaction account, for example your salary may go into one account, but you use a different account to pay your bills.
Depending on the lender you may have to provide between 1 month and 6 months of statements and for some lenders if you bank with them you will not be required to provide any statements.
Other Assets
Generally you will not be required to provide documents supporting your other assets, you would just list them off and provide an estimate of there valuation. In some cases you may need to provide supporting evidence as to the ownership and value of an asset, particularly if you are using the asset to provide security for the loan.
Liabilities
Lenders assess you on your ability to make your future repayments and need to understand what your regular expenses are to ensure you can meet your obligations without financial hardship.
Existing Loan / Debt
The lender will be looking for supporting documentation to verify your any loans or debt that you currently have, this could include loans on other residential properties, credit or store cards, personal loans or equipment finance. The type of supporting documents will include
- Current statements covering six months for mortgage related loans being refinanced
- Current statements covering three months for non mortgage debts being refinanced (e.g. Credit/store/charge cards, equipment finance or personal loans etc).
- Current statements covering one month for any limit facility not being refinanced (e.g. lines of credit, credit/store/charge cards, margin loans, etc)
- Current statements covering one month for any fixed debt/commitment not being refinanced (only required where the repayments cannot be verified through the transaction statements)
Living Expenses / Commitments
What are your day to day living expenses, this is usually best demonstrated by a family budget supported by statements for your transaction account(s) and credit cards. Other regular expenses and commitments may include:
- Ongoing rental, board or living at home arrangements (for example where you are purchasing an investment property and plan to remain in your current living arrangements) – where the payments cannot be verified by the most recent transaction or credit card statements one of the following should be provided:
- Statement or letter from the managing agent
- Current lease agreement
- Letter from parents confirming that applicant resides in their property and does not pay any rent or board if applicant is living at home and not paying rent or board.
- Proof of rental or board payments from Bank records
- Letter from parents or related family member if rent or board is being paid to a related family member
- Child maintenance – supported by Family Law Court order and bank statements or pay slip showing the payments
- Centrelink debt – supported by Centrelink statement and bank statements or pay slip showing the payments
- Court ruled debt – supported by Court order and bank statements or pay slip showing the payments
- Australian Tax Office debt – Correspondence with ATO showing repayment schedule and bank statements or pay slip showing the payments
Next week we will look at some of the additional documentation needed in particular circumstances, for example construction loans, first home owners grants or with guarantors.