How does the loan process work?

Hi, newbie to home purchase and wishing to construct a new home under the first home buyer new home scheme and I have a few questions. I'm wondering how you went about the loan process. I've read I'd need two loans. One for land and then one for construction. What kind of deposit would I need upfront with my lender? Is it 5% upfront for land and 5% upfront for home build that I'd need to supply simultaneously? Or, do I approach them for pre approval first and maximum borrowing power? Am I able to supply deposit on land first and deposit on home build a few months later? Would I be paying repayments on empty lot while waiting to supply deposit on home build?

Your advice is appreciated. Thanks.

We got a pre approval so we knew what we could afford.... We paid the deposit on the land... I think the developer wanted 10% but our solicitor asked for it to be reduced to 5%. We also had to pay the solicitor at time of settlement of land, so factor that in as a cost.

We got a construction loan, so basically what we got pre approved for... Yes once the land settled we had to pay mortgage repayments on that component. We then got a tender for the build, we also paid for the 5% deposit ourselves, and then as each progress payment came in, we drew down on the loan and our repayments increased. We didn't want mortgage lenders insurance which adds to the loan. So we had a total of at least 20% of the build in savings of which, the bank wants you to use up front before they use the loan component. Does that help?

There also may be a time limit (probably 12 months) imposed by the developer on when construction needs to start. This could affect the amount of time you have to save any additional funds before construction starts. The lender will probably also have time limits on when the build should start.

Also look into whether the loan for the land will be Interest Only or not.

It can take some time (several months) to get a new build under contract after you select a builder. It will then take at least 2-3 months for council approvals etc.

Don't be afraid to ask questions of your broker, your solicitor/conveyancer, developer/estate agent, builder sales consultants, etc.

When we went to our lender we were told we needed a 10% deposit for the amount of our land. Once you settle on your land then you would start making payments on your loan. When you pick a builder and you start discussing contracts they will ask you for a deposit. It can be between $1000-$3000 depending on the builder.
We were told you don't have to give the bank a deposit for the construction loan as you will have equity from your land.

One issue that we are experiencing though is that if you don't sign you building contracts prior to your land settlement then you will need to pay stamp duty on it. You can claim it back if you build within the year but its then included in your loan amount which then brings your 10% deposit up.

I'm also still learning but that's just been my experience.

we also had preapproval on house and land so we kew what we could afford and as we had equity in the house we were selling we did not need the cash
used a deposit bond deposit for the land as we used the equity once we owned the land we paid the repayments . we then had a separate construction loan and here is were we paid 5 per cent deposit cash to builder

What documents to you provide to the bank for the loan so they know what to value it?

Is it only the builders final contract?
Or can stuff done post hand over like carpet, tiling, electrical, etc be submitted too so they're part of the loan?

doing things like that post handover usually saves you $1000s. wouldn't the bank what that better value for money?

in the construction loan our bank already had the value of the land so for valuation they also required the builders final contract. this will also have the payment to paid at different stages. our bank when sending payments to the builder is going by this payment schedule
then when approval given before payment etc could be given we also had to give our bank the council approved plans of the house along with the prove we had paid the builder 5 per cent deposit( check with your bank with this as they could be different)
you will need to talk to your bank as to whether or not they will include the post handover items and you may also need quotes of those items .
we included an electrical allowance in the builders contract but supplied all our own lights power points and switches.