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Look: The First Step is to Look
Securing your first home loan might seem like a daunting process to many. Thankfully, it helps to consider how plenty of home buyers will eventually find themselves in a similar situation. As with doing anything for the first time, it helps to do a bit of research before jumping in with the purchase of your first home. Of course, knowing where to look to find the right information is often the best first step you can take. Ironically enough, you won’t find a shortage of available information online, just by searching for information about home loans.
But how do you sift through the bias and identify a home loan that’s best suited to your unique needs? The fact is that while most first-home buyers have a common situation to consider, no two are ever truly identical as far as their needs go. In my experience, it’s helpful to look at the buying and loan process as a whole – going from the beginning of your search to arriving at a settlement. If you’re keen to explore this process in a step-by-step approach, then have we got just the tool for you. In this first instalment of a three-part blog series, our ‘Look, Learn & Loan’ process will take first home buyers like yourself through a healthy process of consideration that ultimately sets you up for your ideal first home.
It All Begins with Your Finances
No two figures will be as fundamental to your first home buyer journey as the initial deposit amount, and the total cost of your first home. When it comes to advising my clients about how much to aim for with their savings, 20% often presents as the golden rule. If you’re planning to buy your first home, you’ll easily see that 20% of the total cost of your home advised by many as the minimum you’ll need, as a downpayment, to secure your property. But why is everyone sticking to this percentage?
It’s mostly to help first home buyers avoid having to pay what’s called ‘Lenders Mortgage Insurance’ – which helps lenders cover the possibility of a home buyer defaulting on their loan agreement in the event of unfortunate circumstances. While some lenders may only require five per cent of your deposit to be made up of your cash savings, this may differ across the variety of lenders you may be considering for your home loan. In many cases, lenders will be particular about any regular savings amounts you’ve been able to put aside, so don’t forget to keep your finances tidy when working out the ideal deposit amount to aim for.
Make Considerations of Your Lifestyle
Most first-home loan applicants rightfully trace the source of their anxiety to being approved by their lender of choice. With this in mind, it helps to be considerate of the different factors that lenders consider when determining an applicant’s loan eligibility. When consulting my clients at this stage of the process, I often recommend that they consider the services of a loan broker, who may be able to support them in identifying how discretionary spending can be affecting their eligibility for a loan. By devising a management and savings plan, many first home loan applicants are often able to cut down on any discretionary spending so as to maximise their savings ability and improve their chances of securing loan approval.
Coming to terms with such a savings plan, and identifying discretionary spending from your declared living expenses is the first honest step towards realising your first home loan. Similarly, I would advise most of my clients seeking their first home loan to identify the price bracket they are able to afford. This can be done through the use of a borrowing calculator, to determine the borrowing capacity they are able to make use of. Eventually, it helps to make such lifestyle considerations from the very beginning — especially because you’ll need to consider how your lifestyle determines the type of home you purchase, and what for. In all likelihood, your needs will differ vastly, should you be buying a home for a family or purchasing one with the intention of turning it into an investment property.
Research is A Consistent Effort for Any First Home Buyer
Since you’ve started from a consideration of your finances, you’ll easily be able to determine ideal locations for your first home, based on a set price bracket and preferred locations. Doing the research from this point on will be a simple process of whittling down the specifics — based on your preferred style of home, and ability to service a mortgage. Of course, I’ll definitely be able to walk you through these kinds of considerations, assisting you in addressing them one step at a time. Once your needs have been identified, it will be much easier for you to hone down your house hunt to select areas and types of homes available on the market.
When it comes to that point, remember that the research doesn’t simply just end when you begin to shop around for a house. Here’s where working with a real estate professional such as myself will come in handy: you can always leverage my network of contacts to keep tabs on the latest property listings, especially as they come and go on the market. From considering comparable sale prices to looking into adjacent suburbs and growth trajectories, there are plenty of ways for you to go house hunting more efficiently.
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Learn: Always, Always Seek to Know More
If you’ve continued reading from my previous article, you’ll probably have realised the common theme. When it comes to landing your first home, it cannot be stated enough how important it is to gather as much information through research as possible. In the last blog article, I covered an overview of the overall process that most first homeowners are likely to go through, from the start of their search to the final settlement. Regardless of the stage of this journey you are on or expect to be focused on, it simply helps to see that going through this process is probably the best way for a first homeowner to gather as much knowledge about the real estate market as is possible.
I always encourage my clients to consider the entire journey, and not just the end result when it comes to securing their first home. The thinking here is that the more you are aware of the whole process, the better prepared you will be at anticipating how your next decision will affect anything else that you consider down the line. As with any important life decision, it matters that you begin by considering where you are financially. However, you’ll find that things start to progress quite seamlessly into the actual house hunt, approval, and offer-related matters once you’ve squared your financing away.
Learning the Basics of the Buying Process
It never is as straightforward as finding out how much your ideal house is, and then making the purchase. As much as we’d like to believe that buying a first home all boils down to meeting an asking price, you would be much better off learning as much as you can about how the entire process takes you from financing to a final settlement. Learning what you can about the buying process ultimately puts you in the best possible position to gain an ideal sale result. Of course, being prepared for the practical aspects of a lengthy buying process will certainly keep you in a position to effectively manage your finances, while preparing you for the time and effort needed to deal with the various details like loan approvals, building reports, and conveyancing.
So What Should You Look for During an Inspection?
It’s easy to get carried away with excitement, especially when you’ve come this far towards buying your first home. Instead of fussing over highly particular areas — like what the awnings and arches look like — be sure to get as complete an experience of your would-be first home as possible. When you do get the chance to visit for an inspection, keep a practical mindset and begin by seeing that everything works as it should.
Depending on the age of the property you’re inspecting, it might be prudent is wise for you to try and identify signs of damage, in the form of warped fittings, cracks, or even water damage. Additionally, it helps to be as considerate of the exterior areas of your potential home. Are you comfortable with the experience of the street that your potential first home is situated on? What condition are the fence and gutters in? All of these might seem like very functional details to look into — but you’ll definitely be saving time and money by getting a clear picture of what state your home is in, before even considering making an offer.
What Can You Learn About the Actual Sale Process?
Plenty of first-home buyers dream of the day that they’re able to make it successfully through the entire buying process, and finally make an offer. But is the next step simply to do with collecting your keys, as the proud owner of your very own home? Before you celebrate with prosecco, it’s important to consider how there are typically two methods of sale to consider: auctions, and private treaties. Either method allows would-be buyers to make an offer on their ideal home. However, there are important differences between the two that you should consider to help you secure success with your first home purchase.
Auctions work exactly as they’re described — with would-be buyers like yourself gathered in public to make fast decisions on bids for a property in question. When the auction concludes, it is fairly clear whether or not a bidder has won the purchase. Private settlements, however, come with their own set of pros and cons. While negotiated privately, and based on a property’s market value, these can often take longer to achieve settlement as compared to an auction sale.
Did you know, however, that I might be able to can assist you with a third option when it comes to making an offer on your first home? The fact is that real estate agents will be able to assist with off-market property offers, which allow you to access listings that haven’t been listed online. The advantage of making an off-market listing helps you get ahead of any competition you may be facing for the same property — especially since ‘offline’ means they aren’t available for all other buyers to see.
Learning All You Can About Mortgages, and Conveyancing
Part of what I do as a real estate agent is help my clients to identify the various steps they’ll need to take, to move ahead with their first home-buying journey. Without a doubt, this will see a potential first-home owner considering a mortgage, and then having to contend with the different options available when looking for their first home loan. Of course, help is just around the corner and there are plenty of different mortgage brokers who can support you during this stage.
Similarly, a conveyancer is someone who could provide invaluable support for anyone needing to consider the legal steps needed for a settlement. This may include needing to address matters like stamp duty, as well as mandatory insurance for your first home. As with the different stages of this overall process, you are always welcome to reach out to me for a consultation.
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Loan: First A Loan, Then the Home
As simple as some may make it seem, securing your first home loan requires a bit more effort than just showing up to your bank and saying ‘pretty please’. Like shopping around for your first home, and then making an offer on your ideal property — finding the right home loan comes with its own due process. Believe it or not, a big part of the process that I would recommend to my clients will help to keep them aware of the best loan options there are available. Although it does require your time and attention, trust me when I say that putting in the research needed will definitely help you heaps when it comes to securing the right home loan.
Among the kinds of research, I would encourage you to do includes looking around to understand the different interest rates available. It’s all a part of what we in the real estate industry like to call ‘shopping for a loan’. The gist of it is that loan options are definitely available, and different ones will cater to different needs as you may require. Of course, the type of interest, and interest rate on a loan option provide just one idea of the kind of repayment terms you’ll eventually be facing as you work to pay off your mortgage. Additionally, approval processes can also factor in how quickly you may be able to access your loan.
Should You Work with a Mortgage Broker to Secure Your First Home Loan?
If you’re among so many first-home buyers who get spooked out by the amount of detail and consideration that go into choosing the right loan, explore how a mortgage broker can help you simplify your decision-making. A professional mortgage broker will be able to assist you in identifying suitable loans based on your needs. This includes browsing through different lenders, which effectively helps you cut any time you spend on loan shopping. With the help of a qualified mortgage broker, you’d be better able to focus your time and efforts on squaring away other, just as important decisions.
Whichever choice of loan you pick is ultimately yours. But you can certainly make that choice more confidently, knowing that you’ve had a professional mortgage broker to hone down on the list of available loan options. Most mortgage brokers are able to work within considerations of your financial standing, to ensure your suitability for selected loan products and repayment terms. Regardless of what your unique financial circumstances may be, working with a mortgage broker is often a smart choice to make, especially when it comes to being new to the real estate market.
Final Considerations for a Mortgage, Before Pre-Approval
As I covered in the first blog post in this series, squaring away your finances will easily lead you to find the best understanding of what options there are available, for considering the right mortgage option. Among the first considerations that most of my clients make are:
- How much to spend monthly on servicing a mortgage
- How a mortgage impacts other long-term goals (i.e. higher education)
- Will mortgage repayments affect one’s savings
Choosing the right loan option will impact you beyond your ability to purchase an ideal first home. When making such a decision, it might help to take a long-term perspective, considering how your choice of loan will impact your future repayments and other major financial decisions. Of course, this is the reason why working with professionals can best equip your decision-making ability — especially as a newbie to the market. Another piece of advice I like to give to my clients is that you should remember that there isn’t a need to spend the maximum amount on a loan, just because you’ve been approved for it.
What is a Pre-Approval, and Why Should it Matter?
Pre-approvals are a common part of the loan approval process and are often used by lenders to screen potential borrowers through a set of conditions. Some of these processes may include preliminary computer assessments that borrowers need to complete (i.e. an online website form), in order to be pre-approved for a loan. However, you should be aware that not all such pre-approval processes provide a ‘full assessment’. When contacting a lender for pre-approval, remember to always request a fully-assessed pre-approval, which may provide a better guarantee that you may be eligible to access the financing you need.
Often, this is a step within the larger loan approval process you can get a mortgage broker or qualified credit assessor to support you. Considering how pre-approvals are employed by a variety of lenders in different ways, that kind of professional support would easily save you the time and effort you need to commit to confident, error-free decisions while shopping around for your first home loan. While some pre-approvals may require potential borrowers to find a property before beginning their loan application process, others may not. Additionally, pre-approvals can take a different amount of timelines, depending on individual lenders. In terms of timelines, different pre-approvals can also hold different expiry terms.
Going from Offer to Sale on Your First Home
As with most things in life, making an offer can be as simple as stating your intention to purchase a property. If you’ve decided that you are in fact interested and serious about moving ahead with a potential first home, then all you may need to do is contact the real estate agent managing the property in question. This could involve you approaching the agent after an auction, or contacting them privately with the details of your offer. Of course, it is always good to be aware of what conditions there may be when it comes to finalising the purchase of your first property. If you’d like to keep aware of the full list of possible considerations, download my ebook here to get the full picture and find your way through a smooth settlement.
