You might think the first step to take when buying a house in Australia is to find the right property. This is indeed an important part of the process, however, getting the money to buy that home is something even more important if you consider applying for a mortgage.
Can you imagine taking months to find the perfect house in the best location and right before making the offer you find out you are not eligible for a loan? Or that you can’t afford the house because you are not able to borrow that amount of money?
This can be not only frustrating but also time-wasting, meaning the market might completely change in the meantime and this can make you lose money.
So, before attending auctions or spending hours browsing the internet for the perfect home for you and your family, let’s understand how things work and what are the very first steps that will enable you to buy your first home in Australia.
The first step to buy a house in Australia:
Getting a pre-approval
The pre-approval is an agreement from the bank you are looking to borrow from stating that they are willing to lend you a certain amount of money to buy a house.
Although this is a crucial arrangement, it is important to highlight that the pre-approval does not guarantee your loan will be approved. This is only an initial agreement that will be pushed to a written document (which will require a much more complex process) once you are ready to purchase the property.
This is one of the most important steps to take when planning to buy a house in Australia because it allows you to know your maximum available funds to organize the price range and focus on houses you can afford. Besides, it makes your offer much more attractive to the seller, once it shows you have higher chances to get the loan approved for a successful purchase.
How does the loan pre-approval work?
To get approved for a mortgage you will be requested by the bank to provide some documents to prove your financial capability and stability. Documents may vary from bank to bank and case to case, but in general, what you might be asked to provide is:
• Proof of identification
• Proof of income
• Proof of Savings
• Proof of debits
• Bank Statements
• Proof of employment
If you are a self-employed worker seeking a home loan pre-approval, be prepared to provide some extra paperwork related to your activities in order to prove your financial stability. Some examples are invoices, tax returns (individual and the business), and business financial statements.
A pre-approval process does not take much time to be ready: it will vary from each bank but it normally takes some business days. The agreement usually lasts from 60 to 90 days, which means plenty of time for you to find the right house for your family to buy.
How to choose the best home loan lender?
Home loan rates can vary from one bank to another and even a small percentage can help you save a significant amount of money in the long term. However, when seeking a pre-approval it is not recommended to get it from multiple banks, once this can harm your borrower history.
This is why using a Mortgage Broker will make your life easier (not to mention faster and cheaper) when choosing the right place to borrow from or get your pre-approval. If you are planning to buy your first house in Australia, please contact us. We can guide you through your financial journey and help you find the most suitable lender for your needs.