Guide to Buying Your First Home
Welcome to Your Step by Step Guide to Getting a Home Loan and Buying Your First Home. This guide will provide you with handy tips, tools and tricks to watch out for when applying for your mortgage and purchasing your first home.
Pre-Loan Homework
Before applying for a home loan, it is a good idea to:
- Get your finances in order
- Avoid late payment and any arrears
- Aim for at least 6 months clear credit history
Write a Budget / Track Your Spending
The goal of this step is to identify how much money you can put towards paying off a mortgage.
Before applying for a home loan, it is a good idea to:
Identify where you are spending your money.
Track your spending for 1-3 months.
Identify areas where you can save money.
Use a budgeting tool such as a workbook, an excel spreadsheet or download an app for your iphone.
Use a ‘How Much Can I Borrow?’ Calculator
This is a quick and easy way to get an idea of your borrowing capacity.
Key Points:
- These calculators can be found on most Home Loan websites.
- This is an indication of your borrowing power only and is subject to you completing a full home loan application form.
- Home Loan Pre-Approvals are non-binding.
- Calculate what your mortgage repayments will be.
Am I Eligible for the First Home Owner Grant or any other Government Assistance?
Broad principles of the grant are:
You must be a natural person (not a company) who is an Australian citizen or permanent resident.
You must be buying or building your first home in Australia.
To qualify, neither you or your spouse (or defacto) can have previously owned a home.
Joint applicants will be restricted to a single application for a single property. Only one payment will be granted.
Research for Your New Home / Investment Property / Block of Land
The most efficient way to research your house is by using the internet.
Key Points:
Researching houses will give you an idea if your taste meets your budget
You can refine your search by number of rooms, close to public transport etc
The internet allows you flexibility to search at a time that is convenient for you
Note: This is just an initial search and not a step for you to start attending open houses. It is best to have all your financials and mortgage application in order before attending open homes.
How Much Deposit Do I Need and How Can I Get It Faster?
It is best to aim for a minimum of between 5-20% deposit for your home. You may also want to save an additional 5% to cover the settlement costs, such as legals, stamp duty etc.
How Can I Save My Deposit Faster?
- Establish a realistic savings plan.
- Set up a living expenses budget and stick to it.
- Alternatively, choose a home loan with Family Pledge which eliminates the need for a deposit. This is where an immediate family member offers their home as security for your mortgage. You can borrow up to 100% of the purchase price and a further 10% to cover the purchasing costs.
Call a Mortgage Broker
Using a Mortgage Broker saves time and lets you tap into their experience and wealth of knowledge.
From your discussion with a Mortgage Broker you want to know:
How much you can borrow and what your mortgage repayments will be
How much deposit you need
The different types of home loans available
Details of the First Home Owner Grant and how to apply for them
The fees associated with the mortgage application and with the purchase of the property
Which documents you will need to submit when applying for a home loan
The timing and steps of the home loan application process.
Absorb and Digest All the Information – Now it’s time to Strategise
At this point you will now:
- Know how much you can borrow and know what your mortgage repayments will be
- Have options on a suitable home loan and lender
- Have an idea of the area you would like to purchase a property in
- Know how much deposit you need.
Strategise
- Work out if you need to save a higher deposit to avoid Lender’s Mortgage Insurance (LMI) which normally applies when you borrow over 80% of the purchase price.
- Waiting a few more weeks or months to avoid Lender’s Mortgage Insurance could save you thousands off your mortgage in the long run.
Get Conditional Approval for Your Home Loan
Getting Conditional Approval requires you to complete a full application form. The lender will then offer you a Conditional Approval for the specified mortgage amount subject to you finding a property.
Gather all the necessary documents, including:
payslips
sufficient proof of id for each applicant
details of any debts or loans to be paid out
details of any recurring income (i.e. rental income, pensions etc)
details of your living expenses etc
details of your previous address if less than 3 years at current address
details of your previous employer, if less than 2 years at current employment
Find a Property
Once you have found a property:
- Check Residex / RP Data reports. Determine if the property is reasonably priced by comparing recent sales in the same area.
- Arrange a walk-thru of the property. Invite your mortgage broker along for a second opinion.
- Make a conditional offer (on your mortgage application being approved) to the agent.
- Negotiate a 10 day cooling off period with the real estate agent, instead of the usual 5 days, to arrange a building inspection, valuation and pest report.
- Submit your home loan application. Ask your broker to arrange a valuation ASAP. It may take a week to receive a formal home loan approval.
- Arrange a building inspection and pest report.
What Will My Upfront Costs Be?
There are a number of fees associated with purchasing a property and obtaining a mortgage. Below is a list of fees that may be applicable to you:
Government Charges:
- Stamp duty on purchase and on mortgage amount
- Registration of title transfer
- Registration of mortgage
Fees:
- Lender’s Mortgage Insurance
- Loan Application Fee
- Settlement
Purchase My Home
This step covers the conveyancing process including the Contract of Sale.
Congratulations, you are now a home owner! At Mortgage House, we wish you all the success in purchasing your first home and look forward to assisting you along the way.
Call us on 133 144 or Enquire Online
