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The Process From Lodgement to Settlement
Once your loan application is lodged, you have entered a crucial phase in the process, leading to the much-anticipated settlement. In this article, we'll walk you through the stages from the lodgement of your application to the settlement of your loan, helping you understand what to expect and how to navigate this exciting journey.
1. Lodgement: A Milestone Moment
Lodgement marks a significant milestone in your journey toward securing a home loan. It's the point at which we submit your application to the chosen bank or financial institution. While the duration of this stage can vary depending on the volume of applications being processed by the lender, rest assured that our team is working diligently behind the scenes to ensure your application progresses smoothly.
2. Service-Level Agreements (SLA): Understanding Timelines
Financial institutions in Australia follow their own internal timeframes known as Service-Level Agreements (SLAs) for evaluating loan applications. The duration of this period may vary, but it typically involves the assessors reviewing your application, requesting additional documents if necessary, and conducting a thorough evaluation. Our advice? Keep an eye out for any communications from our team during this period, as prompt document submission and clear responses contribute to a smoother evaluation process.
3. Initial Assessment and Approval in Principle (AIP)
During the assessment process, the bank assesses your borrowing capacity and reviews your application in detail. If everything checks out, you'll receive an Approval in Principle (AIP) letter. This letter summarizes the bank's initial assessment and may include conditions like reducing your credit card limit or paying off a personal loan. It's a significant milestone that grants you insight into the loan amount you are pre-approved for and any necessary steps for formal approval. It's important to note that pre-approvals typically have a validity period of around three months, although this may vary depending on the lender's policies. With a pre-approval in hand, you have a clear picture of your borrowing capacity and the conditions set by the bank. This empowers you to confidently explore the property market, knowing your financial boundaries. It's a wise step to take before making any offers on a property.
4. Property Selection: Finding the House
Now that you have a pre-approval, it's time to dive into the property market and find the home that suits your needs. Consider factors such as location, construction type (established house, unit, townhouse, land + build, off-the-plan), and your long-term plans for the property. Engaging a buyer's agent, a conveyancer, and a building inspector can provide valuable insights and guidance during your property search.
5. Offer and Contract Signing: A Significant Step
Once you've found the right property, it's time to make an offer. Upon acceptance of your offer, both you and the vendor will sign the property contract. It's a critical step to involve a solicitor or conveyancer at this stage to thoroughly evaluate and comprehend the contract's terms. Once your offer is accepted, it's essential to closely adhere to the contract's provisions, covering various aspects like the deposit, cooling-off period, finance approval, and settlement date. In cases of auction purchases, it's advisable to obtain pre-approval and arrange a building inspection in advance. Be mindful that auction contracts are often unconditional, obligating you to proceed even without financing approval, so assess associated risks carefully. The cooling-off period offers a limited timeframe for reconsideration with minimal financial consequences, although a termination fee may be applicable, typically lower than the deposit amount. It's worth noting that not all contracts incorporate this cooling-off period, especially in auction scenarios or commercial transactions.
6. Your Pre-Approval Application will be Edited for Full Approval
Once the contract exchange occurs, we circle back to your loan application, which will be edited to be fully assessed. Depending on the time elapsed since your pre-approval was granted, we may request updated documents. However, our dedicated team will assist in this process. Among the necessary documents, we'll need the fully executed contract of sale. Subsequently, we'll coordinate a property valuation. If the bank confirms that your financial situation aligns with the pre-approval granted earlier, you will receive a formal approval letter. When you share this document with your conveyancer and agent, the deal will become unconditional.
7. Loan Documents Will Be Issued
After receiving formal approval, your application will progress to the DocuPrep stage, during which the lender's legal representative will prepare the necessary loan documents. At Fidelis Financial, our settlement coordinator will be your dedicated point of contact, overseeing the issuance of these documents. The acceptance method for these documents may vary depending on the lender. Some lenders offer electronic acceptance via Internet Banking, while others may require printed documents with wet signatures.
Once the documents are issued, we will thoroughly review the financial information contained within the legal documentation. It is crucial to note that if you have any queries regarding the legal implications of entering into the loan contract, we highly recommend seeking guidance from a qualified conveyancer or solicitor. Another point that you will need to arrange is property insurance, which must be submitted to the bank before settlement, unless the property is governed by a strata title arrangement.
Settlement is the pivotal moment in the property purchase process. It's when all financial transactions are concluded, and legal ownership of the property is transferred to you. This includes the final payment, typically made via electronic fund transfer, and the registration of the change of ownership with the land registry. Your conveyancer will represent you during this process, and your physical presence is not required.
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