We understand that buying your first home can be a daunting, yet exciting, step in life. To help you feel more prepared and confident in your decisions at this time, we’ve created this 8 step first home buyer checklist, explaining some of the key steps you’ll need to be aware of when applying for your first home loan and purchasing your first property.
If you’re using me as your Perth based mortgage broker, I will also explain all of these steps to you in detail at our initial meeting (either in person or online) and then be guiding you through every step of the way. However, the more information you have upfront, the easier and smoother the whole process will be.
These steps relate to your home loan application, detailing what you will need to organise with your mortgage broker before you start looking for a property to purchase.
Let’s get started!
1. Pre-Application Preparation
Assess Your Financial Situation
- Check Your Credit Score: Obtain and review your credit report. Please talk to us first so we can help you understand what this is and how this works. If you have any previous loan defaults or unpaid bills, that is something we will need to understand, rectify if necessary and make a plan to move forward. Every time you have applied for any type of loan or finance, it will be highlighted as an enquiry on your file and could impact your score – so it’s important you know this before you start going ahead trying to apply for any loans or credit cards without an experienced mortgage broker. A low credit score could be all it takes for a lender to decline your loan application, even if you have adequate income and borrowing capacity.
- Determine Your Budget: Calculate your income, expenses, and savings to establish how much you can afford.
- Calculate Your Deposit: Save for a deposit; ideally, aim for at least 5-20% of the property’s value. The more deposit you have, the greater range of home loan options you will have to choose from. In saying that, if you don’t have a large deposit saved, there are other options we can look at to secure you a home loan. Things like Lenders Mortgage Insurance (LMI) or using a guarantor, could all be options that may help if they are available to you.
- Estimate Ongoing Costs: Budget for ongoing costs including mortgage repayments, property taxes, insurance, and maintenance.
Understand Home Loan Basics
- Research Loan Types: There are different loan types including fixed-rate, variable-rate, and split loans that are available. Talk to your mortgage broker about which loan type would be best suited to your situation as well as any additional features you may require from your home loan. Eg. ability to make extra repayments or setting up your loan with an offset account
- Understand Loan Features: Things like setting up an offset account with your home loan, making additional repayments, having redraw facilities, are some of loan features that people have preferences for depending on their circumstances. Talk to your mortgage broker about any features that sound important and useful to you before you apply for any type of home loan.
2. Getting a Pre-Approval
Gather Necessary Documents:
- Proof of Identity x 2: Passport or current driver’s license and a medicare card.
- Proof of Income: Payslips, PAYG summaries, tax returns, or employment letters.
- Proof of Savings: Bank statements showing your deposit savings.
- Proof of Expenses: Recent utility bills or rental agreements.
- Proof of any other expenses & liabilities: eg. car loans, credit card statements, store cards etc.
- Details of assets including the approximate value of household contents, vehicles, superannuation, and shares etc.
- Approximate estimates of your itemised living expenses.
Apply for Pre-Approval:
- Choose a Lender: Research lenders or consider working with a mortgage broker. Here’s the main reasons people choose to use a mortgage broker to help with their loan rather than going directly to the bank. Especially as a first home buyer, the benefits of working with a mortgage broker to guide you are most definitely something you should understand.
- Submit Application: Provide all necessary documents and complete the application for pre-approval.
- Receive Pre-Approval Letter: Obtain a pre-approval letter, which indicates how much you can borrow. You can use this to strengthen any offer you are making in the next steps.
3. Find Your Property
Research the Market:
- Explore Perth Suburbs: Research areas that suit your lifestyle and investment goals.
- Check Property Listings: Use online real estate platforms and visit open houses.
- Engage Professionals: If you haven’t already done so, now is the time to find an experienced mortgage broker to help facilitate your home loan application. Think of us as your home buying concierge. We can work together with real estate agents, settlement agents and of course your home loan lender to streamline and simplify the home buying process.
- Consider a Buyer’s Agent: A buyer’s agent can help in finding the right property and negotiating the purchase. They are particularly useful in a competitive buying environment.
4. Make an Offer
- Conduct Property Inspections:
- Arrange Building and Pest Inspections: Ensure the property is structurally sound and free from pests.
- Review Strata Reports: If buying a strata-titled property, review the strata report and bylaws.
- Negotiate the Offer:
- Make an Offer: Submit a formal offer to purchase the property. Your mortgage broker will be able to inform you of the details you will need to include in the offer pertaining to the finance arrangements and settlement dates.
- Negotiate Terms: Work with your agent to negotiate the purchase price and contract terms.
5. Finalise Your Home Loan
- Submit Full Loan Application
- Provide Additional Documents: Submit any additional documents required by the lender for formal approval.
- Loan Assessment: The lender will assess your application and conduct a property valuation.
- Review Loan Offer
- Check Loan Terms: Ensure you understand the loan amount, interest rate, fees, and repayment terms.
- Accept the Offer: Sign and return the loan contract if you agree to the terms.
6. Complete the Purchase
- Hire a Conveyancer or Solicitor: Also known as a settlement agent, this person will handle the legal aspects of the property transfer.
- Review the Contract: Ensure the contract is reviewed and all terms are understood.
- Arrange Home Insurance: Obtain home and contents insurance to protect your new property. You will need this organised prior to settlement.
- Prepare for Settlement
- Deposit Funds:Transfer the deposit and any additional funds required for settlement.
- Final Inspection: Conduct a final inspection of the property before settlement.
7. Settlement and Moving In
- Finalise the Transaction: Settlement occurs on the agreed date, transferring ownership to you.
- Receive Keys: Collect the keys to your new home.
- Plan Your Move: Arrange moving services and set up utilities.
- Change Address: Update your address with relevant institutions (banks, utility companies, etc.).
8. Post-Purchase Steps
- Review Your Loan: Set Up Repayments: Arrange automatic repayments for your mortgage.
- Monitor Your Loan: Regularly review your loan terms and consider refinancing if rates change.
If you have used us as your mortgage broker to help you to this point, a part of our service is taking care of the above things for you. You can relax knowing that we are regularly reviewing your home loan for you and will continue to touch base with you to ensure you are receiving the most competitive interest rate. We will also be available to you at any time should you have questions or need to change anything. – Maintain Your Property:
This checklist will guide first home buyers in Perth through each stage of securing a home loan and purchasing their first property, helping you to stay organised and informed throughout the process.
There is a lot to consider, but we are here to help.
Here are some other posts you may find helpful as you embark on your first home loan journey, but if you’re ready to book a discovery call, you can do so here.
11 common mistakes that First Home Buyers Make (and how to avoid making them)
10 reasons to choose a mortgage broker
Should I use a mortgage broker or go straight to the bank
Going Guarantor – what’s involved
Will my HECS debt stop me from getting a home loan?
You can also view our info centre page which has dedicated to First Home Buyers information and FAQ’s here.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute financial or professional advice. While we strive to provide accurate and up-to-date information, mortgage laws and regulations can change, and individual circumstances may vary. We recommend consulting with a qualified financial advisor or mortgage broker to assess your specific situation and needs. Base Home Loans is not responsible for any actions taken based on the content of this blog. Always conduct your own research and consider seeking professional advice before making financial decisions.