How to buy a home in 2022

New year, new home?

If 2022 is the year you want to make your property-buying dreams a reality, we’ve compiled a list of tips to help you get there.

From saving up for the deposit, to getting pre-approved, there’s a lot you should know before you take the plunge and buy a home.

1. Figure out if you’re ready to buy a home

Most Australians want to own a home someday, but not all of us are ready. It’s smart to honestly assess whether you’re in a good place to buy a house before getting too invested.

Here are some signs that you might be ready to buy a house:

• You understand your budget and what you can afford
  
  
• You will be able to cover the deposit AND the other costs associated with buying (e.g. stamp duty, conveyancing fees etc.)
  
  
• You have spent time researching possible suburbs to buy in and know what kind of property you are looking for
  
  
• You know what’s involved in the buying process
  
  
• You have a stable income and employment.

2. Research and understand the property buying process

The more knowledge you have going into your property search, the smoother the home buying process will be.

Spend some time familiarising yourself with property values in your ideal suburbs as well as home loan terms, lenders, types of loans, how the mortgage application process works and everything in between.

Our First Home Buyer Guide contains articles that can help you along your property buying journey.

3. Save up for a home deposit

The biggest upfront cost that comes with buying a home will likely be the deposit. A deposit tells the lender that you are financially capable of repaying the loan and demonstrates positive saving habits.

The larger your deposit is, relative to the purchase price of the property you buy, the more home loan options you will have. The other benefits of a larger deposit can include:

• The ability to negotiate a lower interest rate due to a perceived lower risk in the eyes of lenders
  
  
• It decreases how much money you need to borrow. This means you’ll own your home outright sooner, your repayments will be lower and you’ll pay less in interest over the life of your loan
  
  
• Avoiding Lenders Mortgage Insurance (LMI) charges if your deposit is 20% or more.

There are a number of ways you can boost your home deposit, including:

• Assessing and reorganising your budget to see where you could save more (e.g. cancelling a subscription you don’t need)
  
  
• If you’re eligible, making use of the First Home Owner Grant or First Home Super Saver Scheme (FHSS) to save up for a deposit within your super fund while benefiting from a favourable tax treatment
  
  
• Seeing if you can get help from relatives in the form of a guarantor or gifted deposit.

Read more about how to increase your home loan deposit here.

4. Assess your options if you’re a low deposit borrower

Just because your deposit is less than 20%, it doesn’t mean you can’t get a home loan.

Many lenders still consider lending to borrowers with lower deposits, so long as you are willing to pay Lenders Mortgage Insurance (LMI).

As a low deposit borrower, you are considered to be a higher risk in the eyes of a lender. LMI protects the lender in the event that you default on your home loan repayments.

In order to be eligible for a low deposit home loan, lenders will generally want to see a clean credit history and healthy financial records.

You can also fast-track your entrance to the property market with a guarantor home loan, if that’s an option for you. With a guarantor loan, a close relative will use the equity in their property as collateral to secure a mortgage for the intended borrower.

5. Research your home loan options and find a good broker

Rather than zeroing in on one particular bank, it’s a good idea to find out what home loans and interest rates are out there.

When comparing interest rates online, remember that you won’t be eligible for every product listed. Try not to get caught up in getting the lowest interest rate possible, and instead remember to consider the loan as a whole.

Think about:

• Whether you want or need home loan features like an offset account or redraw facility
  
  
• Whether you would be better suited to a fixed or variable interest rate
  
  
• Whether you need an investment home loan or an owner-occupier loan
  
  
• Your ideal loan repayment term
  
  
• The kind of lender that suits your needs (e.g. a lender with physical branch locations vs an online-only lender).

You can quickly compare home loan interest rates with Aussie. We work with over 20 Australian lenders to ensure you have an array of options.

A good broker can take the hard work out of buying a home, with many bringing a wealth of experience and local knowledge to the process.

Book in an appointment with your local Aussie Broker today to find out more.

6. Have all your documents ready

One of the more tedious aspects of buying a home is getting the paperwork ready.

Getting your supporting documentation correct can fast-track your application and avoid delays.

Here are the typical documents you will likely need to provide:

• Two forms of identification e.g. driver’s licence, birth certificate or passport
  
  
• The last three months of your bank statements to prove genuine savings
  
  
• Any credit card statements, if applicable
  
  
• Recent superannuation statement
  
  
• Documentation regarding other debts, investments and assets
  
  
• Recent tax assessment or PAYG payment summary from your employer
  
  
• Two most recent pay slips
  
  
• Details of the property you intend to purchase.

Self-employed borrowers will likely need to provide more extensive evidence of their personal and business taxes and expenses.

Some lenders may request further documentation, such as additional bank statements. This may cause delays to your application processing.

7. Organise home loan pre-approval

Once you have found a home loan that you want to apply for but haven’t found the right property yet, it’s smart to get pre-approval.

Home loan pre-approval is a formal indication from a lender that they will likely approve you for a specified loan amount.

It’s conditional and can be retracted at any time (e.g. if your income changes). Just because you get pre-approved for a certain loan amount, it doesn’t mean you will formally be approved for that same loan.

The benefits of home loan pre-approval include:

• Narrowing down the property search given that you’ll have a better understanding of your budget
  
  
• Bid with more confidence at auctions
  
  
• Vendors and real estate agents may take your offers more seriously
  
  
• Less stress trying to secure a loan after you’ve found the right property.

8. Organise property and pest inspections, plus a conveyancer

Don’t go in blind to a property purchase and end up with a problematic home.

Before you make an offer, organise a formal property inspection and pest inspection. This can help identify any issues with the property.

Finding out that the property has problems doesn’t necessarily mean that you shouldn’t buy it. Some problems could be minor, and you may even be able to use them as a negotiating tool.

You may be able to negotiate a lower price on the property or have the existing owners correct these issues before you move in.

There is some complicated contractual and legal business involved in buying property, so it’s smart to get a conveyancer lined up for when you’re ready to buy.

9. Be savvy but sensible when bidding and making offers on a property

Negotiating the purchase of a property is equal parts exciting and intimidating. Your experience may also vary greatly depending on whether you purchase at auction or via a private treaty.

If you end up being forced to bid in an auction, it’s important to remain calm and avoid letting your emotions get the best of you.

Here are some pointers for buying a home at auction:

• Make sure the property is right for you
  
  
• Check the property auction regulations in your state to find out about cooling off periods and anything else you should know
  
  
• Research local property price trends and find out how recent auctions have gone – are homes selling way above reserve?
  
  
• Set a strict limit to your bidding. It may be smart to get someone else to bid on your behalf to avoid the temptation to bid above your limit
  
  
• Have your solicitor or conveyancer review the contract of sale prior to the auction to check for anything unusual.

Buying through a private treaty is likely to be less heated, but it’s easy to experience disappointment. Without a moment’s notice, you could be completely out-bid by another buyer and there’s nothing you can do about it.

Having home loan pre-approval can make your offers more appealing to sellers as this indicates a faster settlement process.

Whether it’s your first property or your fifth, buying a home is always a big leap. It’s a good idea to have an expert on hand to guide you along the way.

Book an appointment with your local Aussie Broker to find out more about your home loan options.

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