First home buyer’s guide 2023
Looking to buy your first home in 2022? We’ve provided a guide to help you navigate the key steps to buying your first home.
Step 1: Find a mortgage broker
Step 2: Discuss your requirements and financial situation with your mortgage broker
Step 3: Start looking at properties to gain an idea of the market
Step 4: Get pre-approved for your property budget
Step 5: Make an offer on a property
Step 6: Gain formal finance approval
Step 7: Settle on the property
Step 8: Move in!
Step 1: Find a mortgage broker
Mortgage brokers will work with you to understand what type of loan you’re looking for, your financial situation in order to purchase a property, and will help you to compare different loan offerings from a range of lenders. You don’t have to use a mortgage broker, you can go directly to a bank or lender, but a mortgage broker will help you to compare a range of lenders.
That is exactly what we do here at Unbroke, and we don’t charge you any fee for our services. When you settle on a property and loan, we receive a commission payment from the bank, but we will tell you exactly what this is, and this will not affect the interest rate you receive (in fact, sometimes mortgage brokers have access to discounted interest rates that are not published publicly).
A mortgage broker will also help you to understand any schemes that might be available to purchase your home, or how to structure a loan to provide you with flexibility that suits your lifestyle.
Who loves paperwork? We handle all of the paperwork with the bank for you, and we’ll help you to understand all of the documents you’ll need in order to progress with the loan.
To get started on your property journey, book in a consultation call with us here.
Step 2: Discuss Requirements
Once you’ve had an initial call with your mortgage broker, you’ll then have a follow up meeting to discuss your requirements in more detail. Some of the things to consider will include:
What are are you looking to buy a property in?
What property value range are you looking at?
What are the requirements of a property you would like to purchase (e.g. number of bedrooms, parking, renovated, garden space, levels)
Are you a first home buyer?
Do you have a 20% deposit available for the type of property you would like to purchase?
If you do not have a 20% deposit, what options would you like to look at for purchasing the property (e.g. guarantor, LMI)
Do you have sufficient funds to cover other costs associated with purchasing the property (e.g. stamp duty, government fees, solicitor fees)?
Do you have stable income in order to service the loan on an ongoing basis? Do you have any upcoming life changes that could significantly change your financial situation?
Are there any loan features that are very important to you (e.g. offset account, redraw facility, interest only loan)?
What is more important to you, certainty over your mortgage repayments or flexibility of features and rate?
Step 3: Start looking at properties to gain an idea of the market
Before you make an offer on a property, it is advised to gain pre-approval from your preferred lender to understand your maximum budget based on the area you’re looking in and your financial situation. Some real estate agents now require pre-approval before they’ll allow you to make an offer on a property.
While you’re going through the pre-approval process, it is a good idea to start looking at properties in your desired area, attending auctions and talking to real estate agents to get an idea of the market. For example, looking at how many people are turning up to an auction or how far above the guide properties are selling for will provide you with an idea of how competitive or ‘hot’ the market is, and how far above the guide you may need to bid in order to be successful at an auction.
Step 4: Get pre-approved for your property budget
As mortgage brokers, we will guide you the process of getting pre-approved for a loan (this step is also called conditional approval). We will take your loan requirements and provide you with different lender and loan options that may suit your needs. Once you’ve selected the lender you’d like to proceed with, we will submit relevant documentation on your behalf to the lender for consideration.
The lender will review your documentation as part of the pre-approval process. They may also ask you for information relating to a property you are wishing to purchase (this doesn’t need to be the property you end up purchasing but should be in the same area/type of dwelling as you are looking to purchase).
The time it takes to get conditional approval can vary from a few hours to a few weeks. If you are successful, the lender will provide you with a result that tells you the maximum amount they are willing to lend you. Conditional approval is usually only valid for 90 days, so make sure you don’t apply too early (wait until you are ready to start making offers on properties, and have all of your finances in order).
It’s also important to keep an eye on any interest rate changes between when you gain pre-approval and purchase a property, as the pre-approval rate will not be locked in and you’ll need to factor in any changes to your budget (upfront and ongoing repayments). The good news is, when lenders assess your application they will consider movements in interest rates in their assessment of the amount they are willing to lend you.
Step 5: Make an offer on a property
Once you’ve gained conditional approval from your chosen lender, you’re ready to make an offer on a property or bid at auction. This is also the time when you will send the property contract, strata reports if applicable and any other relevant information to your solicitor to look over. Your solicitor will ensure there are no issues or ‘red flags’ in the contract, and will talk you through the conditions of the contract (settlement date, immediate deposit required if you are successful etc.)
If your offer or bid is successful, you’ll sign the property contract of sale on the day, and will be usually be required to make a 10% deposit upfront. The rest of your deposit and loan will only be required on settlement day.
Step 6: Gain formal finance approval
After you sign the contract of sale, you’ll need to gain formal finance approval from your lender. The lender may ask you for additional information at this stage to ensure they are willing to lend you the amount required to purchase the property, and that your financial situation is aligned with their assessment criteria.
The interest rate you will receive during the formal finance approval process is indicative, but you will receive the interest rate offered at the time of settlement if you are going with a variable loan. If you are choosing to lock in a fixed rate, the rate won’t be locked until settlement day, unless you choose to lock the rate earlier, for example on the day you sign the contract on your new property. Locking a fixed rate in advance comes at a cost but can be effective if you are worried about interest rates rising in the short-term.
Step 7: Settle on the property and move in
Settlement on a property usually occurs around 6 weeks after the contract of sale is signed, but common settlement times can range from 4 weeks to 3 months. On settlement day, your broker, solicitor, the lender and the vendor you are purchasing from will all transact (this mostly happens virtually) to settle the transition of the property to you, and purchase consideration (money) to the vendor.
Settlement day is the day when you can officially move into the property, and the real estate agent will meet you at the property with your new keys!
