The home buying finance journey
The thought of finally buying your first home is exciting and feels like you’ve finally reached peak adulting. You’ve done all your homework from working out how much of a deposit you need to have saved for a certain price range, right down to mentally buying everything from Kmart for your new place.
Regardless of whether you’ve spoken to an adviser before, the team at Inovayt are here for you every step of the way on your journey from your original dream, all the way up until you have the keys handed over to you. While it is an exciting time in anyone’s life, there are some important steps in the finance journey you must take before you jump onto realestate.com.au.
Step one – It’s time to get home loan healthy!
A lot of us think that when we go to the bank to get a loan that it’s just our current income and savings that is looked at. While this is true, what you might not realise is that your whole bank account is put under the microscope. Banks want to see what your current living expenses are, your account conduct, your liabilities and your spending habits. Do you eat at Maccas three times a week? Have an Afterpay account that you use for everything? Chuck a bet on the footy every week? If you answered yes to any or all of these, it may be time to start thinking about shutting down some of these impulsive habits. It’s also a good idea to cancel that gym membership that you swore you were going to use!
Credit cards are another important thing to look at, including any other debts you may have. If you have a credit card, are you paying it back on time? Are you constantly going beyond your credit card limit? These are some of the things you need to look at and be disciplined about. It is also important to budget your money to ensure you aren’t overdrawing your account as this can ring warning bells with the bank. First homeowners also need to keep in mind that they need to budget for more than just a mortgage.
Step two – Setting your budget
Budget time! Often the bank may approve you for more than you are comfortable with. Your Inovayt finance professional will sit down with you to analyse the budget you created as a part of the Home Loan Healthy process to work out what you can afford.
We will then ‘stress test’ your budget to factor in potential interest rate rises, which may occur over the 30-year loan term.
Once our finance professional has worked out the figures, we can determine what price you can purchase a property for and what kind of deposit is required, including savings, First Home Buyer Government incentives, gifts and parental guarantee.
Step three – Supporting documents
Just like any application process, a home loan can feel like paperwork, paperwork and more paperwork! When preparing your home loan application, our finance professional will need to collect supporting documents to verify your financial circumstances, which may include documents such as payslips, ID, bank statements and tax returns.
We use technology to ease the collection of these documents to minimise the time and stress involved in this process.
Because of this, it is best to have everything collated in one spot – so start saving those payslips somewhere!
Step four – Choosing a lender
And now comes the seemingly daunting part – choosing a lender. It may feel like there is an overwhelming number of options to choose from out there – and there is – but that’s no reason to stress. It just means you have more options for finding the right one for you! Your financial professional will sit down with you to collect your requirements and objectives for a home loan. This is critical information that will assist us in recommending a product that suits your best interests.
Step five – Obtain preapproval
It’s time to hold your breath and cross all of your fingers and toes! Your loan application will be prepared by your dedicated Client Service Manager for signing to submit your loan application to the chosen lender. Once submitted, the lender will typically take 3-5 business days to assess your loan application.
Provided the lender is happy with your loan application, they will issue you with a ‘Pre-Approval.’ This means you have essentially ticked 6 out of the 8 required boxes which include your income, savings, credit history, living expenses, account conduct with only satisfactory security (property) and valuation of the security outstanding to obtain full loan approval. Keep in mind, the lender will need to reassess your income, savings, credit history, living expenses and account conduct once you have secured a property.
Step six – Purchase a property
It’s time to go shopping! Here’s where the fun begins, scrolling through real estate websites day and night, attending inspection after inspection until you find ‘the one!’
Your finance professional will explain in detail the various purchasing options, including buying privately with a ‘subject to finance’ clause, buying at an auction, buying unconditionally, settlement terms and deposit options.
Try not to get disheartened here – the property market can be tough. Whether you’re missing out in auctions by the smallest of margins, or houses in your ‘price range’ are selling for way over reserve, this is all part and parcel of purchasing your own home. Patience is a virtue when house hunting!
Step seven – Valuation
After you have secured your dream home, the lender will need to value the property to ensure it’s worth what you’re paying for it. These valuations are used to determine the loan to value ratio within the home loan application and will potentially impact the amount the bank is willing to lend.
Step eight – Bank approval
It’s now time to tick those last two boxes! Once we send in the signed contract of sale along with the completed valuation, the lender should proceed to unconditional approval.
Remember, the lender will need to reassess your income, savings, credit history, living expenses and account conduct once you have secured a property.
Step nine – Mortgage contracts and letter of offer
It’s official! The lender will issue you with your mortgage contracts which include a letter of offer. Your finance professional will sign these with you to answer any questions you may have.
Step ten – Final checks
Dot the i’s and cross the t’s! Your lender will confirm the mortgage contracts have been signed correctly, that you have taken out insurance on the property, a repayment account has been set up and that the settlement has all been booked in.
Step eleven – Settlement
The day has finally arrived, you get your keys! The time of day your settlement has been booked in will depend on when you can get your keys.
There is nothing you need to do for settlement, your legal representative will complete this on your behalf.
Step twelve – Congratulations
Your dream has finally become a reality! It’s time to pop the champagne to celebrate and enjoy all of your hard work, sacrifices and dedication that has got you to this point.
One of our financial professionals will ensure you have your internet banking set up, that you know your first repayment date and how to access your repayment account. They’ll also provide you with some tips to pay off your loan sooner. The only decision you’ll have to make now is whether to hit Kmart or Ikea first…
The finance journey to owning your own home may seem a way in the distance, but we are here to help you every step of the way. From making your account home loan healthy, right up until you’ve got the keys in your hand, we are here to make you feel confident in the process of buying your first home.
Get in touch today to speak to one of our mortgage brokers about starting the finance journey today.