Buying your first home is an exciting milestone, but it can also be a complex process with many moving parts. As a mortgage broker, I’m here to provide a clear, straightforward guide to help you navigate this exciting next step in your life!

1. Understanding Your Financial Position

Before you start house hunting, it’s essential to get a clear picture of your financial situation and determine your borrowing power. This includes:

• Credit Score
  Your credit score plays a significant role in determining your mortgage and what lenders we can submit your application with. Credit scores can play a part in your interest rate as some lenders have a minimum score requirement. Although we understand that times can get tough, this is where non-conforming lenders come into place!
  
  
• Budget
  Ensure you have enough savings not only for the deposit but also for closing costs, moving expenses, and an emergency fund. If you are securing a spot on the scheme this means you need as little as a 5% deposit, although it is always a good idea to be extra prepared.
  Check out the first home buyer grant and scheme information online.
  
  
• Income and Employment
  Brokers & lenders will want to verify your income and job stability. Make sure you have consistent employment and can provide recent payslips, tax returns, and possibly letters from your employer.
  
  
• Borrowing Capacity
  Get in touch with a mortgage broker to gain some insight into how much you can borrow. By knowing your borrowing power, you can then figure out your maximum purchasing price and the deposit that will be required.
  
  
  

2. Pre-Approval

Understanding and securing a pre-approval can significantly help your home-buying experience:

• Pre-Approval
  This involves a more thorough examination of your financial status, including your credit report, income verification, and other documents. Pre-approval provides a more accurate estimate of how much you can borrow and shows sellers you’re a serious buyer with the funds already pre-approved. A pre-approval generally lasts for 3 months and can be extended if you don’t find something you love within that timeframe.
  
  
  

3. Choosing the Right Mortgage

Selecting the right mortgage is crucial for your financial future. Here are some common options and products:

• Variable Rate Loans
  With a variable rate loan, the interest rate can fluctuate based on adjustments made by the RBA, which the lender may choose to follow, either by increasing or decreasing the rate accordingly. Lenders generally match the RBA’s adjustments. Variable rate loans offer more flexibility to pay down your home loan faster and often include features like redraw and offset facilities. This means that the rate may be adjusted periodically, allowing you to stay on a competitive rate as the market changes.
  
  
• Fixed Rate Loans
  Fixed rate loans provide stability with a constant interest rate and set monthly payments. This option offers certainty during the fixed-rate period, as repayments remain unchanged. However, most lenders limit flexibility with fixed rate loans, meaning they typically do not offer redraw or offset features, and there is a cap on extra payments above the minimum each year. It’s important to lock in a fixed rate when rates are at their lowest, as breaking a fixed loan may incur break costs. This type of loan is ideal if you prefer predictable payments, particularly when interest rates are low.
  
  
• Offset Account
  A mortgage offset account is a savings or transaction account that can be linked to your home loan. The balance in this account ‘offsets’ daily against the balance of your home loan before interest is calculated. An offset account can help you cut years off your home loan term and save money on interest. Some lenders even allow multiple offset accounts which can help you save further on home loans.
  
  
• Redraw Facility
  A redraw facility is a loan feature that is usually available with variable rate home loans and some fixed rate loans. A redraw facility lets you access any extra repayments you’ve made on your home loan.
  
  
• Principal & Interest
  Principal and Interest is the most common repayment type. Principal & Interest repayments mean that you will pay the principal, which is the amount borrowed to reduce the amount you owe, plus the interest, which is the cost of borrowing.
  
  
• Interest Only
  Interest Only is a less common repayment type. This is because you will only pay the cost of borrowing ( interest ) and will not reduce the loan balance ( principal ). Interest Only can’t be applied for the full loan term but usually is applied for 1-5 years.
  
  
  

4. The Home Buying Process

Once you’ve secured pre-approval and chosen the right mortgage that best suits your situation, here’s what to expect next:

• Find a Conveyancer
  Don’t do it yourself! A conveyancer is a licensed professional who assists you with the legal processes and documents involved in buying and selling a house. They are critical to have on your team. Conveyancing laws vary between Australian States and Territories so ensure your conveyancer is licenced to practice in the state of your property purchase. 
  
  
• Find a Real Estate Agent
  A knowledgeable agent can help you navigate the market, find homes that meet your criteria, and negotiate on your behalf.
  
  
• Start House Hunting
  Visit open houses, explore neighbourhoods, and use online resources to narrow down your options. When you find a property or suburb you like our amazing Loan Processing Officer, Russ, can provide detailed property / suburb reports to help give further insight. This will additionally help ensure that you are looking at properties within your budget.
  
  
• Make an Offer
  When you find the right home, you will need to request a copy of the Contract of Sale from the selling agent. It is important to have this reviewed by your conveyancer or solicitor. 
  Now is also a brilliant time to discuss with your conveyancer other due diligence matters such as clauses. It is prudent for most purchasers to list ‘subject to finance’ and also ‘subject to building and pest inspection’ before signing a contract.
  
  If you are buying a property affected by a body corporate (apartment / unit / townhouse / flat may be an indicator in the property address) they can also examine the body corporate history to help you avoid any potential issues. 
  
  We have been asked whether it is possible to buy or sell property without a conveyancer. Caveat emptor; no we don’t recommend you try this! If you get it wrong, it can be a very expensive mistake.
  
  
• Home Inspection
  A thorough home inspection can uncover potential issues. It’s better to address these concerns before finalising the purchase.
  
  
• Valuation
  The lender will order a valuation to ensure the home’s value aligns with the loan amount. The lender also reviews your financials and the property details.
  
  
• Settlement
  This is the final step where you sign the paperwork, the funds are released to you, and you officially take ownership of the home. YAY!
  
  Your conveyancer will work alongside us as your mortgage broker, the vendor’s (seller) conveyancer and your lender to co-ordinate settlement on the settlement date. 
  
  
  

5. Post-Purchase Tips

After closing on your new home, keep these tips in mind:

• Budget for Homeownership Costs
  Homeownership involves ongoing expenses like property taxes, homeowners insurance, maintenance, and utilities. Create a budget to manage these costs effectively.
  
  
• Build Equity
  Make extra payments on your mortgage when possible to reduce your loan balance faster, pay less interest to the lender, and own your home sooner. By doing this you can put the interest savings to better use!
  
  
• Maintain Your Home
  Regular maintenance helps preserve the value of your home and avoid costly repairs in the future.
  
  
  

6. Here To Help

Navigating the home-buying process can be overwhelming, but you don’t have to do it alone. As a mortgage broker, I’m here to help you with:

• Personalised Mortgage Solutions
  I can provide tailored advice based on your financial situation and homeownership goals.
  
  
• Problem Solving
  If you encounter any challenges during the process, I’m here to help you find solutions and keep the process moving smoothly.
  
  
• Check Ins (even after you settle into your new home!)
  Just because you’ve secured your home doesn’t mean I won’t be around! I’ll be here for regular check ins to ensure you’re still happy and comfortable with your setup.
  

Buying your first home is a significant achievement, and with the right guidance and preparation, it can be a smooth and rewarding experience! If you have any questions or need assistance, feel free to reach out. I’m here to help you.

Happy house hunting!

https://www.housingaustralia.gov.au/support-buy-home/first-home-guarantee