Your Home Buying Planner to purchase your next property with confidence
One of the daunting things about purchasing your first or next property is whether you’re going to be approved by the bank or lender. However, with careful planning, you can ensure a greater chance of success and purchase your next property with confidence.
We’ve put together a Home Buying Planner you can download to ensure you check off all the areas most important to go from the excitement of wanting a property to stepping in the front door of your new home.
Let’s get started…
Determine whether you’ve saved enough deposit
Before you even begin to start seriously looking for a house, it pays to determine how much you have saved for a deposit.
What you’re able to save for a deposit will dictate the value of the house you’re able to buy (alongside your borrowing power, of course).
Ideally, you want to have at least 10% of the property’s value saved. This will cover a:
- 5% deposit
- 4% stamp duty
- $1500 conveyancer
- $1000 additional costs
However, the more you can save for your deposit, the better position you’ll be in. For example, if you have a 20% deposit, you may not have to pay Lenders Mortgage Insurance (LMI).
LMI is a one-off payment if you’re borrowing more than 80% of the property’s value.
If you discover you need more for the type of house you want, or if you have limited savings to start with, there are a few options to help.
If you already own a property, then you may be able to access 80% of the equity to use as a deposit.
If you’re a first home buyer, then you may be eligible for the first home buyer’s grant.
Outside of that, look at a savings plan to allow you to reach your goal.
Download the Home Buying Planner, which will also give you a plan to help you save for your desired goal.
Deep dive to ensure you’re financially stable
When a bank or lender looks at your financial situation, what will they see? It’s important for a lender to feel confident you’ll be able to repay the loan, so they look closely at your credit history, job security, whether you’ve been able to pay previous debts and even how easily it would be to sell the property you intend to buy.
In some cases, banks will need you to show 3 months’ worth of bank statement for them to identify your living expenses and how that will be impacted when a loan is added.
To help you and avoid being turned down for a loan, you may need to look at consolidating debt, cancelling credit cards or paying down higher interest rate loans.
Don’t be deterred if you have a bad credit history though. A mortgage broker will be able to look at your situation and find an option that will suit you.
Pulling those puzzle pieces together is what we enjoy doing here at Ohana Finance. So reach out if that’s you.
Get a House Buying Support Team
Maybe you’ve never thought about having a House Buying Support Team, but you’ll find it puts you in a better position to have a successful loan if you do.
Some of the people you may want to consider are:
- A local mortgage broker, naturally! You may not have considered what a mortgage broker can help you with. Many of our clients didn’t know how a mortgage broker could help them until they found themselves not being able to secure the home of their dreams. Often they’re referred to us without fully understanding our role in the process. Most have believed they could simply go to a bank and be approved.
- Local real estate agents who list houses in the areas and price bracket you’re interested in.
- A conveyancer/solicitor
- Accountant if you happen to be looking at an investment property and need to understand the tax implications and benefits.
Download a copy of the Home Buying Planner to ensure you check off who you need in your team. And if you need recommendations for professionals in the Wollongong, Shellharbour and Nowra regions, please reach out.
Get pre-approval BEFORE looking
Have you ever considered what would happen if you found the home of your dreams, but had others putting offers on the same house? What if they’ve already been approved for a home in that price bracket - and you haven’t?
As a mortgage broker, we help you work out which lender you’ll qualify with and how much you’re able to borrow and be approved for.
This involves looking at things like your payslip, business statements and bank statements before even submitting documents to the bank.
On your behalf, we can then submit your application to the bank to gain pre-approval. Your mortgage broker will be able to tell you how long this process takes, depending on the lender they determine is a good fit for you. In our experience, it’s anywhere from half a day to a week.
The beauty of having pre-approval is that when you find the home you want, your loan is already approved, subject to the bank approving the property itself, of course.
Determine what house meets your needs
As we’ve already discussed, not all properties will be approved by a bank. So it’s important to do your research on what banks will and won’t approve. We can provide further guidance with this.
Keeping in close contact with the real estate agents from your House Buying Support Team is also an important element so you can stay on top of new property alerts for the areas you’re interested in. The other key is looking at what properties are selling for, as this is a stronger guide on what certain properties are worth in the current market.
A quick and simple way to do this is to look at realestate.com.au and Domain.com.au under “Sold Properties”.
Inside the free Home Buying Planner, we’ve provided your “must haves” and “dream items” for your new home that you can refer back to when you’re looking at new listings and sold properties to determine what does and doesn’t fit into your budget.
Download a copy of the Home Buying Planner.
Making an offer and cooling off periods
Once you find the property that ticks all the boxes for you, it’s time to make an offer. With your support team in place, you should be confident about taking this step knowing you’ve ticked off all the items so far on your list here.
Nevertheless, it can still be daunting to put forward a price and then negotiate to find what suits you and the seller. A seller will have different motivations for selling and knowing this can help in determining whether a seller is willing to accept a lower price or whether they’re holding out for the right price for them and to cover costs for their next property.
As stated before, compare this property against similar properties that have recently sold to help you determine the offer you put forward.
Finally, accept the offer and move onto gaining approval from your conveyancer and mortgage broker. Once this is completed, you’re free to sign the contract and pay your holding deposit.
You then move into what’s known as the cooling off period; a period of time where you can still back out of the sale.
Your cooling off period may come with a clause - something like the ability to cancel the contract if you’re unable to gain formal loan approval.
In New South Wales, that cooling off period is generally 5 business days - unless it’s an auction, in which case there is no cooling off period. We can sometimes help negotiate longer cooling off periods to provide enough time for loan approval.
And, if you reach a point where you do need more time, then you can ask for an extension to the cooling off period.
During the cooling off period, you don’t just sit back and wait for the bank’s approval. There are some other steps you need to complete too.
Completing your due diligence is important during this period to ensure the purchase you’ve made is a good one.
Your conveyancer will likely recommend a building and pest inspector who can check the property as a first step.
Gaining formal approval
If all has gone well so far, you can sign a Contract of Sale. However, this only becomes binding once it’s signed by the seller AND you. A special note: DON’T sign the contract until you know you’ve been approved for finance.
You actually need formal approval from the bank that the property you’re buying adheres to their standards and that they’re willing to provide you the loan funds. This step usually entails the bank sending a valuer to inspect the property.
However, this is dependent on your situation.
You don’t have any guarantees until this formal approval comes through.
But, once it does, you’re now officially the homeowner of your dream property. A week later you should receive the loan offer documents from the bank to sign.
You can go through these documents with your mortgage broker OR you can use a solicitor.
You may be asked to provide evidence of building insurance when sending your loan offer back.
What’s next?
It would seem logical that you can move straight in, right? Not quite.
Prior to settlement, you can complete a final check to ensure the property is in the condition you agreed upon. You can book this visit with the real estate agent.
Your conveyancer will also do a final title search to ensure the certificate of title is ready to be transferred into your name on settlement.
Settlement is generally six weeks after paying the deposit. On the day of settlement, the conveyancer and bank will meet and loan funds will be handed over in return for the certificate of title and authority to release the mortgage.
Thankfully, this isn’t a step you need to worry about, as your conveyancer will handle this step for you.
After settlement, the keys - and house - are yours.
It’s time for that housewarming party!
Download a copy of the Home Buying Planner to ensure you check off each step as you go.
And if you’re ready to discover how much you can borrow, reach out to Scott and the team at Ohana Finance.