Get Your Paperwork Ready: Essential Documents and Bank Policies

Before you apply for a home loan, it's crucial to have all the necessary documents in order and understand key bank policies. Proper preparation can streamline your application process and increase your chances of approval. In this blog post, we will guide you through the essential paperwork and important bank policies you need to know as a first-time home buyer.

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Essential Documents You Need:

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Identification (ID):
- Primary ID: A passport or birth certificate.
- Secondary ID: A driver’s license or Medicare card.
- Ensure your ID documents are valid and up-to-date.
Income Verification:
- For PAYG Employees:
  - Recent 2 payslips.
  - 3 months of bank statements showing salary deposits.
  - Most recent PAYG payment summary or tax return.
- For Self-Employed:
  - 2 years of individual and company tax returns.
  - Financial statements for the last two years.
  - ATO Notices of Assessment for the last two years.
Proof of Savings:
- 3 months of bank statements showing your savings history.
- Ensure your savings are in an account held in your name.
- Banks look for "genuine savings" which means money saved over a period, not large lump sum deposits unless held for at least 3 months.
Rental History:
- A 12-month rental ledger from your landlord or property manager.
- This document helps demonstrate your ability to make regular payments.
Transactional Bank Accounts:
- 3 months of bank statements showing all transactions, including income deposits and expenses.
- Ensure your statements reflect responsible spending habits.
Credit Card and Loan Statements:
- 3 months of credit card statements showing your monthly spending and current balance.
- Statements for any existing car loans or personal loans showing the balance and repayment history.
Buy Now Pay Later Accounts:
- Latest statements for services like Afterpay, ZipPay, or PayPal Pay in 4 showing account balance and repayment history.

Understanding Bank Policies:

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Every bank has their own policies, it's your mortgage brokers job to understand all of them and know which bank will work best for you, but here are some key things to be aware of.

Loan-to-Value Ratio (LVR):
- Banks typically lend up to 80-95% of the property’s value.
- Borrowing over 80% usually requires Lenders Mortgage Insurance (LMI).
Minimum Apartment Size:
- Some banks require a minimum apartment size of 50m². Smaller apartments may not be accepted as security.
Preferred Property Zones:
- Residential and freehold properties are preferred.
- Be cautious with leasehold, commercial, or crown properties as they might not be acceptable to all lenders.
Title Preferences:
- Torrens and Strata Titles are preferred.
- Be careful with Company and Community Titles as they can be more complicated and not accepted by all lenders.
Self-Employed Requirements:
- Most banks require self-employed applicants to have at least 2 years of tax returns and an ABN registered for 2 years.
- The income used for serviceability is the taxable income, not the gross revenue.
Impact of HELP/HECS Debts:
- These debts will reduce your borrowing capacity as they are considered financial obligations.
Buy Now Pay Later Services:
- Treated as debt and must be disclosed. Regular usage can impact your credit assessment.

Having the right documents and understanding bank policies can significantly improve your chances of getting your home loan approved. By being well-prepared and organized, you can navigate the loan application process more smoothly and confidently.

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