If you want your property purchase to be as stress-free and successful as possible, it’s important to follow a methodical process that begins even before you start looking at online listings.
The first thing you should do is reduce your spending and increase your savings rate at least three months before you apply for a home loan pre-approval. That can help make you look more creditworthy in the eyes of lenders.
Second, be wary about changing your employment situation. If you reduce your hours, move to a new company or quit your job to start a business, that could raise doubts about the reliability of your income. That, in turn, will make lenders question your capacity to repay a loan, which might make it harder for you to qualify for finance.
Third, order a copy of your credit report – you’re entitled to a free copy every three months from the main credit bureaus, Equifax, Experian and Illion. If you discover your credit report contains incorrect negative listings – which does happen from time to time – you can apply to have them removed. (Correct negative listings can’t be removed.) Removing them could increase your credit score, which would improve your chances of qualifying for a loan, and on more favourable terms.
The fourth step in the process is to visit a mortgage broker. Your broker will calculate your borrowing capacity, compare loans and apply for a pre-approval on your behalf. Also, your broker will be able to advise you on how much of a deposit you need, whether you’re eligible for government incentives or if you have equity to help towards your deposit.
Fifth, find a conveyancer or solicitor. Their job will be to review the contract of sale and oversee the legal transfer of the property from the seller to you. While you won’t need their help until later in the process, it’s better to search for a conveyancer / solicitor well in advance, so you have time to compare. It is also helpful knowing you can send any potential contracts for checking as soon as you receive them for a fast turnaround.
Sixth, consider whether you would like a buyer’s agent to manage the entire buying process (research, due diligence and negotiating) for you.
The seventh step is to research suitable locations for your home or investment property purchase. This will be informed by your borrowing capacity, which you will know if you’ve already secured a pre-approval.
For the eighth step, attend open homes. This will not only give you the chance to identify positives and negatives in a particular property but will also give you a chance to better understand the local market and level of buyer competition.
Ninth, when you find a property you want to make an offer on, organise building and pest inspections, which should identify any hidden flaws. If you find any structural defects or pest infestations, you can either walk away from the property, ask the vendor to fix them or use them to negotiate a lower price.
If you’re thinking about buying a home or investment property, your Loan Market broker can calculate your borrowing power and manage your mortgage application.
