How to go about buying a home- step by step

[CocktailBubba]

Hello, As the title says... I was hoping someone will be able to share some info on where to start, what to look out for, and possibly what kind of first home buyers grants and/or incentives are avaliable in around the next 12 months. I would think we would need to make a date with some banks to check out interest rates and how much they would even lend us :) combined income at the moment is about 120,000 before taxes, little expenses and just a 10,000 car loan, does anyone have any ideas on what kind of mortgage we could possible get? Thank u, thank u, thank u :)

[CocktailBubba]

Whoops... How do I delete one of these... I uploaded from a phone and it was going so slow so I hit submit again and would u know it, it posted twice lol.

[IndigoJ]

Get a deposit. No matter how much you earn if you dont have at least 10% deposit you wont get a loan (5% if you are eligible for that through a mortgage broker (wizard ect)). This is where we had the most problems. Deposit has to be "genuine savings" Which is money you have saved over a period of time that has been in the bank for at least 3 mths. Once you have that sorted have a look at the price range you want, get preapproval from the bank (help to know you will most likely get the loan you want before you find the house you like).
Find your dream home. Inspect ect. Sign Contract pending fincance and building and pest approval and get Lawyers to look at it, its a good idea to get a 21day (or more) Finance period, in case you encounter problems with the bank (we did). Organise Building and pest inspections.

You get your FHOG on settlement (i think its $7000 now) and it cant be used as a deposit. Your mortgage you may get depends entirely on the bank and how much deposit you have. Our income is $100,000 a year, with $27,000 in loans and we got approved for a $265,000 loan with 10% deposit.

Good Luck and Happy Hunting.

[CocktailBubba]

Thanks indigoj for this so quickly!! See, with regards to the deposit.. I have no idea how much we would be able to borrow, so no idea on how much deposit we'd need to save, but then also do not want to borrow the maximum that we could so that we still have some breathing space. And I just had a look in the paper yesterday at a decent looking house but in a pretty crappy suburb that I wouldn't want ds to grow up and go to school in ect and it was listed for $495,000 :( Dp really would love to buy and Must admit his enthusiasm is starting to rub off onto me but it's just such a HUGE comittment and I get paranoid thinking what if we go ahead with it and then something goes wrong and we lose it all :( lol I'm such a worry wart haha! Thank u again!

[IndigoJ]

Wow thats heaps. It might be a good idea to go to the bnk and look into a few thing. For a $495,000 loan i would assume need at least $49,500 depotit (more if its rural and maybe double that depending on the bank.)
Anz is a good bank apparently, im with nab and had a few problems.

We get our keys on Friday!

[jenna33]

Depending on the bank you go with, you'd be able to borrow that much. Also depends on your credit card limit as the bank looks at the limit of your card, not what is owing on it.

There are a few lenders that don't require you to have genuine savings, but you either pay higher interest rates or a lot of entry fees and expensive exit fees if you pull out within 5 years or so. Being first home buyers, some lenders only require you to have 3% genuine savings as the FHOG will go toward the loan on to of this 3%.

Many lenders allow a maximum 90% lend now but there are still a few around that do 95%. You must have a completely clean credit history and been with your employer for more than 12 months to be considered.

if I were you, I'd go to a broker rather than visit each of the banks. It is hard work and confusing going to each bank. A broker will be able to find you a few choices to go with and make sure it covers all of the features you would like in a loan. At the moment, there are smaller lenders that have better rates/conditions that the big banks can't compete with. Some of these lenders only brokers have access to, so this may increase your options. At the moment I can obtain loans as low as 5.8%.

As for incentives, first home owners receive 7K and depending on the state you are in, you will either won't have to pay stamp duty or get a discount.

As for having a finance clause, it depends on what state you are in. Not all states have this.

I agree that you shouldn't go to your limit. interest rates will rise this year and it's a good idea to have a bit of breathing space for that.

[IndigoJ]

Depending on the bank you go with, you'd be able to borrow that much. Also depends on your credit card limit as the bank looks at the limit of your card, not what is owing on it.

There are a few lenders that don't require you to have genuine savings, but you either pay higher interest rates or a lot of entry fees and expensive exit fees if you pull out within 5 years or so. Being first home buyers, some lenders only require you to have 3% genuine savings as the FHOG will go toward the loan on to of this 3%.

Many lenders allow a maximum 90% lend now but there are still a few around that do 95%. You must have a completely clean credit history and been with your employer for more than 12 months to be considered.

As for having a finance clause, it depends on what state you are in. Not all states have this.

.

No bank will give you a loan on 5% deposit. And you have to be in an area where it isnt too risky. I live rural (residential) so it was too risky to lend to us. If they did the mortgage insurance would equal the 5% deposit so in effect we would need 10% deposit.

You Cannot use the fhog as part of your deposit (we werent allowed to) and we already had 5% deposit so we werent allowed to get the 10% deposit using the fhog.

The fhog doesnt have to go onto the loan, you can use it for renovations ect

I am in Qld

[CocktailBubba]

Hi Jenna, I'm in Vic and neither of is have credit cards.. My my credit history is clean, Dp has paid off everything that was escalated to debt collectors. Hmmm these interest rate rises do worry me though, Ive been told that interest rates would continue to rise and if we wait maybe another 18-24 months we may be able to buy a much nicer, near new house for much cheaper as lots of people who have jumped into the market while interest rates were at all time lows will not be able to cope with the rises will have to sell for whatever they can get which will inturn bring down the value of the surrounding homes...** fingers crossed this is not the case for many people, but I worry that I would be one of them.
Indigoj- thanks for mentioning anz, I actually get benefits with them through work so I'll definitely have to check them out!
Yay!! Contrarulations!! I didn't realize from ur first post how recent you purchased your home. Good luck moving and I hope it all goes well for u!
Also, are there still any extra bonuses if u build?

[jenna33]

Re bonuses for building, you'll have to check with your state's state revenue office as to whether they are giving incentives. I'm in NSW and while the government no longer gives the additional FHOG, it does halve stamp duty for anyone buying a house and land package til July.

To check if your partner has any bad ratings listed due to debt collectors contacting him, you should obtain a copy of his credit rating. You can contact Veda for this, it doesn't cost much to have peace of mind that his record is clear. If it's not, it's good to know so he is well prepared for when the bank does the checks. Mortgage insurers (who insure banks when client's borrow over 80% value of a home) are strict with credit history so if you provide an explanation with your application if there is a mark on his record, your prospects of success are much greater.

As for whether prices will drop when interest rates rise, I guess it can go either way. This happened when rates went up to 9% but since then the banks have been toughing with their lending policies so while there are likely to be defaulting on their loans, it won't be at the same numbers as in 2008 so it may not have such a big impact.

Just to clarify, it is possible to obtain a loan on a 5% deposit. Not as common as before, but it is possible. One major bank is still considering 95% lends for all customers while another 2 offer this to their existing customers. There are some second tier lenders that also offer 95% loans. Mortgage insurance premiums are extremely high in comparison to 90% so that is something to consider if you have limited savings.

Being in Vic, you would need to save more than 3% as you don't get the FHOG stamp duty exemption like we do in NSW so you'd have to pay that up-front too. A lot of my clients use the FHOG to pay their mortgage insurance(LMI) so depending on how much you borrow will depend on what you will need to save to top up the funds required to pay the LMI.

[lovelymum]

Hi Jenna, I'm in Vic and neither of is have credit cards.. My my credit history is clean, Dp has paid off everything that was escalated to debt collectors. Hmmm these interest rate rises do worry me though, Ive been told that interest rates would continue to rise and if we wait maybe another 18-24 months we may be able to buy a much nicer, near new house for much cheaper as lots of people who have jumped into the market while interest rates were at all time lows will not be able to cope with the rises will have to sell for whatever they can get which will inturn bring down the value of the surrounding homes...** fingers crossed this is not the case for many people, but I worry that I would be one of them.
Indigoj- thanks for mentioning anz, I actually get benefits with them through work so I'll definitely have to check them out!
Yay!! Contrarulations!! I didn't realize from ur first post how recent you purchased your home. Good luck moving and I hope it all goes well for u!
Also, are there still any extra bonuses if u build?


Hi I am a sales consultant for a builder so I will tell you what I know. The $18,000 gov grant ends on 30th June this year for building a new house - in saying that you must have signed a full building contract by 30th June to qualify and it can take up to 12 weeks to prepare a full contract I think after that the building grant drops to around $12k. Check out the State Revenue office website for full details on FHOG and eligibility. In terms of lending there are several lenders in the market who will do 95% lends your credit rating has to be squeeky clean, there are also lenders who will do loans with non genuine savings - they do exist but I think they have higher interest rates as they are generally non bank lenders but sometimes it can be worth it just to get your foot in the door as you can always refinance later. I have over 10 years experience in the finance/property law industry and as I said I now am in construction. If you are in the south east of Melbourne and are thinking about building PM me with your email details and I will send you some house and land package info to give you an idea of whats available and some pricing. Good luck!!