What is the loan application process for first home buyers?
1. Research: Make sure you shop around for rates and compare different lenders and products to make sure you select the right one for you.
2. Pre-approval: Get pre-approval for the amount of money you would like to borrow - this generally lasts for three months. Having your loan pre-approved means that if you find a property you like you can move quickly. Some lenders, such as MyRate, will give approve your loan subject to a property valuation free of charge.
3. Documentation:
- Pay slips
- Group certificates
- 100 points of ID
- Tax returns and financials for the past two years if you're self-employed
- Enough savings to cover the deposit and other fees (where applicable)
4. Find your property:
- Find the right property.
- Hire a conveyancer to check the contract, organise pest and building inspections, strata checks, etc.
- If you're buying at auction you will typically have to pay 10% deposit at the fall of the hammer with no cooling off period.
- Your deposit will be held in trust by the agent - any interest earnt is split between you and the vendor at time of settlement.
- If you're buying from an offer you may be asked to pay a 0.25% holding deposit if your offer is accepted - this is usually not refundable.
- You will then usually have a five-day cooling off period, during which you can organise valuations, inspections and finalise your finance.
- Remember: The property will not be held exclusively for you until contracts are signed and exchanged and a deposit (usually 5-10%) paid.
5. Always keep your lender informed:
- Let your lender know what's happening at all stages - the more information and documentation you can provide them with, the faster they will be able to process your loan.
- Provide your lender with contact details of your solicitor/conveyancer, vendor and real estate agent.
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If more than 30 days has passed since your pre-approval, you will need to supply your lender with:
- Up-to-date pay slips.
- Up-to-date savings/credit card/loan statements.
- Your updated assets/liabilities to confirm nothing has changed since pre-approval.
- Provide your lender with a copy of the Contract of Sale.
- First Home Owners Grant: If you are buying your first home, your lender will provide you with the forms to complete or you can apply through your solicitor/conveyancer.
6. Valuation: Your lender will organise this once you have provided them with a copy of the contract of sale. If the property is currently tenanted it may be difficult to get access to perform the valuation which may take a little longer
7. Formal approval: If all your documents have been received and processed and the valuation comes back positive, formal approval on your loan will be granted
8. Loan documents: Your lender will instruct their solicitor to send the loan documents to you, which you need to sign and return. Your lender will then liaise with your solicitor/conveyancer until settlement. Your loan will usually settle around 30-42 days after signing the contract (depending on the stated contract terms)
9. Settlement: Congratulations! Your account has been set up and you are ready to start making repayments!
What is my borrowing power as a first home buyer?
The amount you can borrow commonly known as borrowing power or borrowing capacity - will differ from lender to lender. Your borrowing power is measured based on your complete financial situation, taking into account:
- Expenses including credit cards, personal loans, rent and any other outstanding balances
- Income streams such as salary, investment properties and government assistance
After considering the above, your lender will be able to confirm how much they would lend you.
How much money can I borrow as a first home buyer?
The amount you can borrow - commonly known as borrowing power or borrowing capacity will differ from lender to lender. Your borrowing power is measured based on your complete financial situation, taking into account:
- Expenses including credit cards, personal loans, rent and any other outstanding balances
- Income streams such as salary, investment properties and government assistance
After considering the above, your lender will be able to confirm how much they would lend you.
How much deposit do I need as a first home buyer?
The deposit required depends largely on the type of home loan and the lender you select. As a general rule if you are an owner occupied purchaser you will need between 5-10% of the purchase price as a deposit. If you are an investor, generally you will require 10% of the purchase price.
You can use a combination of genuine savings for the past three months and contributions from other avenues such as bonuses, gifts or family assistance
How do I save for my deposit as a first home buyer?
Budget, budget, budget! Set yourself a realistic savings plan and put away a little bit of money each pay cheque. It would be a good idea to do some research on property prices in the areas you are interested in to work out how much you need to save before seriously looking to make a purchase.
What documentation do I need as a first home buyer?
When submitting your application there are a number of documents you may be required to present, including:
- Driver's licence
- Passport
- Birth certificate
- Recent pay slips (usually the most recent two)
- Tax returns (usually past two years)
- Bank statements (all accounts)
The type of documentation needed will vary from lender to lender so this should be clarified. You may also be required to have your documentation signed by a JP.
What else do I need know as a first home buyer?
What is the First Home Owners Grant (FHOG) and am I eligible?
What is Lenders Mortgage Insurance (LMI) and do I need it?
Can you explain conveyancing for me?
What government fees are involved and does a first home buyer need to pay them?
How do I make my repayments and how often can I make them?
What is a redraw and why would I need a redraw facility?
What is an offset account and do I need one?
What is stamp duty and do I need to pay it?
What is a guarantor and why would I need one?