First Time Buying A Home? Here’s How To Apply For A Mortgage

Although buying your first home is exciting, it can also be expensive. But with enough planning and budgeting, you’ll secure a good loan and join the property ladder as soon as possible.

Around 66 percent of Australian households own their own homes with or without a mortgage, a decline from 68 percent in 2015, the Australian Bureau of Statistics reveals. Owners with a mortgage pay $484 on average weekly housing costs, while owners without a mortgage pay roughly $53. Keep reading for the 3 key steps to buying a home with a mortgage.

Step #1 – Check if you qualify for a home loan

The first step towards homeownership involves checking if you’re eligible for a home loan. Get in touch with a handful of lenders to find out how much money you’ll be able to borrow in keeping with your existing financial situation and debts.

With a figure in mind, you’ll know the type of home and location you can afford.  This also prevents you from making the wrong decisions when getting a home loan.

Also, be aware of any expensive fees, such as application, account, maintenance, or overdraft fees, that come with your loan and prevent you from reaching your financial goals as quickly as you otherwise could. In particular, loans with an offset sub account eliminate fees and decrease the interest charged on your loan.

Step #2 – Establish a realistic budget

Determining a realistic budget for your first home ensures you make a purchase that you can comfortably afford without overspending. Take all associated expenses into account — mortgage payments, homeowners insurance, and property taxes.

After identifying a price range within budget, you can calculate your ideal deposit. 20 percent of the house purchase price is a good savings goal.

Although some lenders only want a 5 percent deposit, smaller deposits leave you with a more expensive loan, in addition to lenders mortgage insurance. Paying a larger deposit can also indicate financial responsibility, which ups your chances of getting approved.

Step #3 – Pay off your debts

If you’re already in debt, it can be harder to get approved for a home loan. Or, it may mean you’re given a smaller loan than you ideally want. By working to pay off your debts before applying for a loan, you can increase your chances of getting a good mortgage rate.

Lenders aren’t so much bothered by debts such as university HECS debt, as they are by unsecured, high-interest debts. So, prioritise paying off large debts like credit cards first.

Step #4 – Compare and Choose the best home loan for you.

If you have done the above steps and believe you are ready to go, then there is only one step left and that is to choose a lender and home loan. This is best done with a mortgage broker. The service of a mortgage broker is free of charge, unbiased and can typically have access to over 40 lenders and can compare home loan rates online. This is far better than going directly to your bank, who may not have the best home loan and rate, potentially costing you thousands of dollars in the long run.

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