Mortgage Experts Blog

Below I have outlined my top 5 tips for first home buyers. I hope it assists you.

Many first home buyers I have helped over the years get bamboozled by the process of buying their first home. It's not surprising really considering the process involves dealing with multiple people and the whole thing is new and a probably a bit daunting not to mention it's the biggest monetary transaction most people ever make.

Most first home buyers rely on finance to assist them with the purchase of their first home. However many first home buyers confuse the role the lender plays in the process. There are actually two processes happening concurrently when you buy a property and need a loan. The actual purchasing process between you and the seller and the loan process between you and your lender.

I think the best way to think about it for many first home buyers (and those that haven't done it in a while) is that you will of course need 100% of the purchase price + costs such as stamp duty if applicable to buy the property. A lender is providing a loan to you to assist you purchase the property. So part of the total amount required to buy your first home can be made up from a lender's loan and the balance from your own funds. Lenders policies and your borrowing capacity will determine how much of the value of the property they will be willing to lend you (currently 95% home loans are the maximum). You will then need to contribute the balance of funds to the vendor and cover the associated costs.

The timing of when money changes hands is another confusing part of the process for many first home buyers. Normally the seller will require a deposit when you exchange contracts. This is the time when you sign the contract and are formally entering into an agreement to buy the property. Settlement is when you pay the balance of your funds to the vendor and the lender pays the loan amount you are borrowing also directly to the seller (not you). At the same time your lender gets the title deed from the seller and they keep it so they can register a mortgage over the property. Also at that time you become the legal owner of the property.

There are two professionals that assist you in the buying process 1) a mortgage broker or bank manager and 2) a solicitor or conveyancer. One deals with the loan process and the other the purchasing process.

2. Work out if you qualify for a loan and how much you can borrow before looking.

This is fairly self explanatory but it's essential that you know where you stand before you start looking for your first home otherwise you may be wasting your time. While it may not always be necessary to get a pre approval it is definitely worth sitting down with a mortgage broker or bank manger to see if you are likely to qualify and for how much. Loans for those with a small deposit such as 95% home loans can be a bit tricky to get approved so if you have a limited deposit amount I would recommend that you get a "proper pre approval" in place. Every lender has different pre approval policies, some don't even do them! While others give you a nice bit of paper saying you are pre approved but they don't actually assess your financials. Many first home buyers end up being declined for a loan even after they have had these types of pre approvals.  So if there is some doubt about your employment history, credit history or you have a limited deposit make sure you get a proper pre approval that has been assessed fully, that means providing your savings history, pay slips, tax returns etc.

Part 2 here:
http://mortgageexpertsonline.com.au/_blog/Mortgage_Experts_Blog/post/
Top_5_tips_for_buying_your_first_home_part_2/

Regards,

Marty McDonald