Are you tired of renting or living with your folks and ready to call a house your own? Getting started can be a daunting process and we're here to answer some of the common questions asked by first home buyers. From what information lenders analyse when building your risk profile and how much deposit you'll need to save, to what you should look out for when searching for your perfect home!
SPRING CLEAN YOUR FINANCES The first step in your property journey is to review your finances. If you can aim to get your finances in order and start to implement these new habits up to 6 months prior to applying for your home loan, you'll be less likely to come up against any road blocks along the way.
Avoid using Afterpay, Zip or other 'buy now, pay later' platforms. Lending requirements are tightening and these services are seen as a line of credit because you’re borrowing money you don’t have. While these services can be helpful if used correctly, if you aren't great at budgeting or are an impulse spender, it's best to avoid using them prior to applying for a home loan.
Reduce unnecessary spending - believe it or not, lenders actually look at how much you spend on UberEats, alcohol or lattes from your local coffee shop plus other non essential items, to assess your overall risk profile.
Pay your debts on time and don't overdraw your bank accounts - personal loans, credit cards etc. Any dishonours will negatively impact your credit score and credit worthiness.
It probably goes without saying but any form of gambling is a no no. From horse racing, to the casino, banks will take this into consideration when assessing your risk profile.
Hold off on changing jobs - most lenders require you to be in a job for more than 6 months, but don't worry if you have only just started a new job, it's not a deal breaker!
DEPOSIT Most lenders accept 5% of the purchase price of the property, but 10% is a more appropriate goal in order to cover additional costs, such as stamp duty and settlement fees. With a deposit of less than 20% you will be required to pay lenders mortgage insurance in most instances.
INFORMATION GATHERING We’ll conduct an initial assessment of your financial situation and borrowing capacity to ensure you’re on the right track to achieving your desired goal. This step in the process is generally done over the phone and email, but we can arrange to meet in person if preferred.
ARRANGE A PRE APPROVED LOAN Once we’ve established your borrowing capacity, we recommend securing pre-approval. Arranging a pre-approved loan and having the lender assess your finance application can eliminate some of the possible doubt prior to placing an offer on a property, and avoid potential disappointment. Pre-approval lasts for 3-6 months depending on the lender. We've written an article here which delves into the benefits of home loan pre-approval.
THE PROPERTY SEARCH When looking for property, be sure to do plenty of research. Knowledge is power! Compare property prices across locations which fit within your budget and have potential for capital growth. Look into areas which have existing and planned infrastructure, including roads, public transport, schools and shopping centres.
If you’re unfamiliar with property values in a particular area, we can prepare a property comparison report for you at no charge. A property report includes the estimated value of the property and its sales history, recent sales in the area, and a snapshot of the suburb. MAKE AN OFFER The sales contract (also known as an Offer and Acceptance), will confirm the selling price as well as any terms and conditions associated with the sale. Your commitment will usually be subject to finance approval, a building inspection report and a pest inspection. When signing a contract, we recommend you allow 21 days for finance approval, and a further 28 days for settlement. When it comes down to signing your documents, we take care of all the paperwork, so all you need to do is sign!
If the process still seems daunting, you can be rest assured we're here to help you every step of the way! Contact us if you're ready to get started.
