Advice/Steps to Purchase First Home/Investment

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  Hybroid on 15/07/2021 - 16:17

  +1

  Go to your bank and arrange a session with their mortgage/home loan specialist. They will quite happily guide you through the entire process and you'll learn a ton of information. You don't have to proceed with them at all, just have the conversations and obtain the knowledge. There are also plenty resources available online including estimate calculators worth a go which is what they will do as well. Basically profiling your savings, income, expenses etc to balance how much they might be willing to loan you. Alternatively, you can use a third party like Lendi.com.au which is more automated online.

  Note this is probably not an ideal time to purchase property with the current inflated prices in the market but sometimes needs must.

  • 

    RoverNOut on 15/07/2021 - 21:47

    Thanks for the advice!

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  Drakesy on 15/07/2021 - 16:19

  I'd approach a broker/bank now and go through the approval process for your loan so you know exactly how much you can spend and there's no hold up or disappointment if your bank can loan you your full amount.

  Then appoint a conveyancer to oversee any properties you may be interested in to go through any possible legal issues or easements/restrictions placed on the property.

  • 

    RoverNOut on 15/07/2021 - 22:04

    Interested to know more about a conveyancer. Are they $$$ heavy? Wouldn't they be something I would consider further down the line?

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  SF3 on 15/07/2021 - 17:07

  If you don't want to talk to anyone (as you seem to have suggested).

  There are loan calculators from banks to estimate how much you can borrow, plus many other online resource to explore and read on your own (you should get plenty of information by googling).

  • 

    RoverNOut on 15/07/2021 - 22:04

    Thank you for the help!

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  p1 ama on 15/07/2021 - 17:20

  How much can I borrow?

  Borrowing power calculator - put your details in and it'll give you a number.

  When to get a pre-approval? To be able to effectively looking at purchasing a property

  Before you start looking - most agents won't even give you the time of day if you don't already have pre-approval.

  • 

    RoverNOut on 15/07/2021 - 22:05

    Thanks for the advice!

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  miruku on 15/07/2021 - 18:38

  Agree with those saying to check bank calculators first. You can play around with them a bit to see how much more you could borrow if you close a credit card or pay off HECS for example.

  Chatting with a bank or two can give you some further info. For example, if a parent or someone is willing to be a guarantor on your loan, that could increase your borrowing power with the bank.

  Don’t feel obligated to get a pre-approval with anyone right away. Also avoid getting more than one pre-approval as it affects your credit rating.

  Before getting a pre-approval I would suggest casually checking some properties to give you a better idea of the market and to set your expectations for what you could afford. Then have a pre-approval for peace of mind for when you seriously start looking.

  • 

    RoverNOut on 15/07/2021 - 22:05

    Thank you for the help!

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  pm88 on 15/07/2021 - 21:32

  Things can get a bit more complicated if you or your partner don't have fulltime work. If either of you are casual then I recommend using a broker.

  If you have a 20% deposit then you will have more options from more lenders such as neo banks (less risk = lower interest rate). Less than 20% deposit and you will have fewer options to choose from (potentially higher interest) and may have to pay LMI which can be built into the loan.

  Just talk to a broker and mention the things you have already, and what is most important to you such as low interest rate. If they try and steer you towards a particular option you are uncomfortable with, let them know you wan to shop around. You don't owe the broker anything so don't feel pressured, on the whole they are ok to deal with as they get an upfront commision but also an ongoing one for the term of your mortgage

  • 

    RoverNOut on 15/07/2021 - 22:06

    Thanks for the help! is 10% deposit okay these days?

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  JDMcarfan on 15/07/2021 - 21:37

  +4

  Just bought my first place. Talking to your bank is always a great place to start but its near impossible to ever get a good rate with them (I work for one & have my loan with another, go figure!), and they're extremely conservative with loan serviceability (i.e. Loan Repayments approx. 30-40% of income). I'd definitely have first conversations with a bank and ask how much borrowing capacity you have but as mentioned don't get too many pre-approvals (I got 1 before heading to a broker).

  A broker on the other hand, has a much better understanding of all the products available across a market and will often ask more intricate questions to determine what's best for you. The only reason why I don't say to go to them first is they are usually only inclined to be of greater assistance if they get the hint you are willing to commit to them (i.e. they only make money when you settle). Always be aware of the products they offer/recommend (as they may act to promote one product, in their own self-interests), but overall they're still better than a bank's employee. Further, they usually are much more willing to 'fudge' expenses to increase your borrowing capacity, so that its not ludicrously conservative (think 40-50% of income for loan repayments) which should allow greatly improve your borrowing power. For example my current borrowing capacity is 25% higher than the highest offered by my bank (place of employment), and repayments come to about 50% of combined salary + rental income.

  A broker will also advise of types of properties/areas to avoid (those that bank's view as higher risk) and potential ways to improve borrowing power by paying down/eliminating debts (HECS & CC's), but can also help in that regard by not forcing you to do so. I for example reduced my borrowing power by 50k with the condition of me being able to keep my HECS debt (as its interest is inflation-based). Further, if you come from a low-risk skilled profession (actuary, accountants, lawyer, doctor, physio, maybe engineers/scientists etc.) there are brokers who have agreements with banks to allow you to borrow at 90% (10% deposit) LVR without LMI (compared with 80% (20% deposit)). This is something that has been a great benefit to me and has allowed me to enter much sooner than I otherwise anticipated. So if that's something that applies to you, those options should be considered too.

  Another piece of advise is to pay for contract-reviews from a solicitor, but learn to pick up on the things of note. Doing so will help you analyze plans & contracts before visiting a property and filter out properties that aren't suitable without forking out $500ish dollars a pop. Most people will view dozens of places before picking the one and will show serious interest in at least 5-10 so there's considerable savings if you can learn to read them effectively. Of course, always get a professional review before an auction/signing contracts.
  If you have friends/family who are active property investors, perhaps get them to give you a hand and they'll point you in the right direction

  Hope this helps. Feel free to DM if you need any other advice. .

  • 

    RoverNOut on 15/07/2021 - 22:08

    +1

    Thanks for the in-depth help! I'll definitely reach out, if I get stuck at a particular step :)

  • 

    JDMcarfan on 15/07/2021 - 22:08

    +1

    When I say "Skilled", I don't mean to discredit anyone with educational qualifications outside of what I mentioned.
    I was simply referring to the definition for skilled professional used by my broker, which was; people who are currently members (or seeking membership) with a recognized professional industry body. These bodies usually have programs that involve further education (post-graduate)/have admission examinations to gain membership.

    Examples include: CPA, CA (me), CFA, AMA, Actuaries Institute etc.

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  whitelie on 15/07/2021 - 21:58

  Sure you can use the "How much can I borrow?" calculators but chances are it will spit out some unrealistic amount of money. I think last time I did one, it put us around $1.5mil or something ridiculous. Better off using the "What will my repayments be?" and being honest with yourself if you can meet those or not. Also look in to the "Additional costs" calculators as these will break down what you're going to be up for with stamp duty etc if you can't access FHO grants/rebates.

  I would use a good broker and not just whoever you bank with. They'll have access to a wide range of lenders to give you the best product for your situation.

  The first step is pre-approval. Don't really bother looking until you have this. It will be valid for anywhere from 60 days to 6 months (likely shorter time frame with the current situations going on) but is very easy to extend it if you haven't found what you're looking for in this time period.

  You don't need 20% deposit, it will just save you paying LMI. More often it is better to get in to the market than keep trying to save up 20% and chase the market. You can get away with as low as 2-5% with some lenders but would need to cover stamp duty and possibly LMI if you aren't eligible for rebates so it ends up higher than working out just 5% of the purchase price. Can also look in to the FHLDS if you can get that and avoid paying LMI. Again, speak to a broker as they will be best to deal with your specific situation.

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    RoverNOut on 15/07/2021 - 22:09

    Yeah I've always been wary of the unrealistic amounts from the borrowing calculators. What is the best way to get to the 'correct' amount?

    Thanks for the help btw!

    • 

      Ughhh on 15/07/2021 - 22:12

      What is the best way to get to the 'correct' amount?

      By consulting a real person, ie bank or broker.

    • 

      whitelie on 15/07/2021 - 22:13

      If you've got a deposit together, you should have a fair idea of how much you're saving each pay which will essentially service the mortgage. Same if you're renting, what you're paying in rent would likely be a big chunk of the repayment.
      Play around with the repayments calculators and work out roughly what you can afford. Also a good idea to see how much the repayments change if the interest rate goes up as I'm sure it will at some point and you still need to be comfortable enough to make those repayments.