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Home loan guide / Buying a home

You've found your dream home, now what?

3 min read

By Tic:Toc

Buying a new home isn’t too dissimilar to playing chess. Both require motivation, patience, and willingness to navigate a very complex process. Whether you even understand how to play, or not.

The game begins scrolling through online real estate feeds; seeking advice from family; and doing weekend drive-bys in the suburbs on your wish list. And that’s the easy part.

Your first move: make an offer on the property. This isn’t straightforward, as the right offer depends on how clued up you are on the current and trending market conditions, as well as the true market value of the property: you don’t want to end up overpaying. Paying more than you should is common in Australia’s current sellers’ market. Despite dwelling values softening slightly in the eastern seaboard by May 2017, the dip followed a five-year bull run of more than 70% in Sydney and 50% in Melbourne, based on Core­Logic figures. We’ve found Harcourts Victoria chief executive, Sadhana Smiles’, tips on buying in a seller’s market to be very handy.

Following the offer come a series of steps that happen almost simultaneously, but never in an efficient or predictable order, thereby making it impossible for the home buyer to feel in control.

Your second move: choose the home loan. Home finance is often taken for granted – a grudge purchase in itself, something akin to buying insurance or utilities. This is irrefutably the case as to why so many Australians default their home loan choice to the option with the lowest opportunity cost. That cost being ‘dollar value’ (low interest rate) or ‘time’ (trusting their bank or mortgage broker to handle the hassle for them).

Couple standing in front of house

Emma and Luke, soon-to-be-parents and homeowners in a popular fringe suburb of Melbourne’s CBD, say the journey from selling their current property to securing their second has been an ordeal. It’s a tale as old as time, one which could have been circumvented by having a clearer understanding of the roles and requirements of their bank, broker and conveyancer.

Just to get pre-approval took us three weeks.

Emma Cassiano

“In the meantime, we missed out on one house at auction because our finances weren’t approved yet, and then we made an offer on another house before pre-approval, because we couldn’t afford to miss out again. The whole process was drawn out over six weeks, and we were only called once in that time to hear we had gotten final approval. It felt like we were chasing our tails.”

Like most couples in their situation – early thirties, upgrading to a family-friendly property whilst not sacrificing the convenience of living close to the city – the initial adrenalin rush of finding a dream home can quickly spiral into an emotional rollercoaster, as you try to make rational decisions through a haze of anxiety and anticipation.

“The icing on the cake was that our conveyancer didn’t receive our mortgage contract until the day before settlement was scheduled. And we still have no idea what was going on behind the scenes.”

According to Matt Smith, Director and joint owner of Klemich Real Estate, this experience is not dissimilar for first and seasoned property buyers alike. Mr Smith reports the whole home loan process needs demystifying, as it will help both buyers and sellers in the long run.

Home buyers have been looking for a quick and easy process for a long, long time. The complicated, cumbersome, old home loan process has to change.

Matt Smith, Klemich Real Estate

It's clear something needs to happen in the industry that enables customers to call the final Checkmate in the home loan process. In the meantime, below is a useful step-by-step guide on the process as it currently happens to help you secure your dream home.

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  1. Dream home #spotted

    It’s safe to take off your rose-coloured glasses for one minute and do a building inspection before committing to the cracks.

  2. Arrange an appointment with your bank or broker

    Sit down, take a breath. Determine how much you can borrow and what you can afford to pay in repayments. Hopefully it covers those cracks.

  3. Choose your loan

    Choose the loan type and interest rate that’s right for you. You may need to phone a friend, or an expert, to help with this.

  4. Prepare your financial docs

    This is the most gruelling step, but you need to have all your bank statements, PAYG summaries, income statements and other financial documents at the ready to process your application.

  5. Time to apply

    Now’s the time to complete your application with your bank or broker. This means, another appointment. How time drags.

  6. Assessment

    Your application is assessed by the lender. More back and forth, guaranteed.

  7. The purchase contract

    You’re committing to the home. At this stage you are either getting pre-approval, which you can take forward to make an offer on the home. Or, you may have already bid in advance, so now you need to finalise the loan approval and sign the purchase contract.

  8. More assessment. Full approval

    Your loan documents are processed by your bank and/or broker (branker?). Then, full approval, finally.

  9. Signed, sealed, delivered

    The official Mortgage Contract is signed, and a settlement date is booked in. Here, your conveyancer will handle the Mortgage Contract and liaise with the seller’s conveyancer.

  10. Settlement day

    You get a nice phone call saying the deal is sorted. Now you can pick up the keys, and bubbly, from the realtor.

  11. Welcome home

    Walk in the door and start making the house your home.

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