The Steps Involved in Buying a Property from Start to End (broker journey) Feb 18, 2021 | Blog The prospect of buying a home is both an exciting and daunting one for many Australians. On the surface, the process is as simple as finding a home you like, putting in an offer and then getting a loan. However, the steps involved in purchasing a property are far more involved and require planning and research to ensure you are ticking every box along the way. Understand Your Reason Why The process of buying a property starts long before you ever set foot in an open home. The first step is to understand what you are trying to achieve by buying a property. Are you looking for a house to live in with your family? Are you looking to buy an investment property? Is your goal to use property as the vehicle to financial freedom? By asking yourself these questions, you can start to process of thinking about what it is you want to achieve and then what type of property will help you get there. Once you have a clear idea around what it is you want, you can start working with the right professionals beginning with your home mortgage experts. Meeting with Your Mortgage Broker Most people believe the finding the right property is the most important part of the process. The reality is that it is normally getting the finance which causes the most issues. Once you have a clear idea of what it is you want to achieve with your property purchase, you should sit down with your mortgage broker to discuss your personal and financial situation and plan how you should proceed. Your mortgage broker will be able to make a preliminary assessment of your financial situation and determine if you are likely to be able to achieve your goals. Assessing Buying Power One of the most critical elements of buying a commercial property is how much you can borrow, based on your current earnings and lifestyle. These days, lenders are incredibly strict with their requirements as to how much an individual is able to borrow. When meeting with a mortgage broker, you will generally be required to undertake a fact find, which is essentially a breakdown of you (or a couple’s) current financial situation. This includes details such as: Income (from all sources – ie. payslips) Estimated monthly living expenses Current liabilities (debts such as car loans, personal loans) Total Assets Current level of savings (Bank account statements) Track record of employment and employment type They will also look to assess your credit record and determine if your credit history will impact your chances of getting credit in the future. They will also want to know your type of employment because this will impact the lenders they will approach. Generally speaking, lenders like to see steady long-term employment as it suggests that you are the type of person with the ability to pay back a loan. Your mortgage broker will then take these details and use them to get a clearer picture of what your borrowing capacity might look like. A rule of thumb is that you can potentially borrow around 5-7x your annual income. For example, if you are earning $100,000 per year as a single, then you can potentially borrow around $600,000. Most lenders and banks also have detailed tools that can be used to get a better picture of how much you might be able to borrow. The Commonwealth Bank has a tool, that can give you a rough idea of how much you could potentially borrow based on your income and expenses. Your broker will also assess your current savings and the amount of money you intend to use as a deposit as that will have a range of implications and will impact which lenders to approach. As well as other considerations such as Lenders Mortgage Insurance (LMI). Researching Your Options Your mortgage broker is effectively the person who works behind the scenes to find the most suitable loan product for your situation. While most people think that the lowest interest rate is all that matters, your mortgage broker understands that there are many different lenders that each serve different types of borrowers, meaning there is a lot to be done to find the best loan. Mortgage brokers have strong relationships with lenders so they can get a clear understanding as to your likelihood of receiving a preapproval and ultimately a loan. It’s important to note that every time you apply for finance shows up on your credit file. If you are applying and getting rejected by lenders, then your odds of getting finance are greatly diminished. This is one of the most important things a mortgage broker does for their clients and they ensure your credit record is protected. Preapproval Once a lender has given an indication that they will be prepared to lend to someone, the preapproval process can begin. This normally involves submitting all the required application forms, statements and supporting documents to the lender for their credit team to assess. This can be held up if they require further documents or clarification. Once pre-approved, you are considered to be ‘conditionally approved.’ This means that there are still conditions that apply before you are offered a loan. This might be something like a property achieving a satisfactory valuation. Finding Your Property and Getting a Valuation Normally the best practice is to seek a preapproval, prior to starting the search for a property. Having a preapproval in place allows you to know your budget very clearly and can also assist in making your offer more competitive. Once you’ve found a property and put in your offer, which would be subject to finance, the next stage of the process begins, which involves getting unconditional approval for a loan. As mentioned, the first thing most lenders will want is a valuation. These days, this is normally ordered electronically and your mortgage broker can assist with getting this done. Valuations can be delayed at times, because of issues with property managers and tenants or issues with the contract of sale. Unconditional Approval Once all of the conditions for the loan have been met, you will then be given unconditional approval which might also be called formal approval. It effectively means that your loan is approved and you can go ahead with settling on the property. To satisfy a subject to finance clause, you will need unconditional approval. At this stage, the lender will send you the loan documents to sign. This is normally done with your mortgage broker and they can assist you as they do throughout the entire process. Settlement Once your loan documents have been signed and the lender has looked them over, you can then move onto the next phase which is settlement. At this point, you can normally hand things over to your solicitor, conveyancers or settlement agent, who will handle the details. Your solicitor, for example, will organise the settlement date and you will simply have to relax and wait for the process to play out. Once the loan has been drawn down and settlement has occurred, everything should be in place. Your mortgage broker/ home loan advisor can help to ensure all details of your loan account are in place as well as other things like offset accounts are correctly set up and that you have access. After your final inspection, it’s time to enjoy your new home or investment property. Why YFA? We have always aim to provide updated yet useful blogs by adhering to traditional values of transparency and integrity, while continuing to bring steady and consistent performance over the long term. Our motto has always been “Honesty” and Over 20 years, we have always believed that understanding the customer requirement should be the first priority. We are very passionate about helping individuals and families to identify financial goals with the correct focus on their plans for the long run through our home loan expert. We feel proud and blessed to win awards because of successfully assisting people to achieve financial success. What makes us stand out from others is the utmost trust from our clients who have trusted us. Our Home loan finance expert in Australia is always there to assist you. We love going beyond the bolts of financial crisis in an easier manner just to help people believe that money never blocks their happiness. Our home mortage experts try to the best of our abilities to be a sane, and trusted entity in the sector of Wealth Management via providing services in Finance & Insurance. Credit Rep Number – 418883 | ABN – 8119516623
