The Home Buying Process Explained, Step-by-Step

After all, buying a home is one of the most significant financial decisions of your life, and with a loan that extends over several decades, repaying your home loan is a long-term commitment.

Many people don’t even take the first step because they don’t know where to begin; that’s what we’re here for. Check out our handy step-by-step guide to help you get into your first home.

1. Meet with your local MoneyQuest Specialist

The most important part of the home buying process is knowing you aren’t doing it alone. Reach out to your local MoneyQuest broker to get the ball rolling. MoneyQuest brokers have access to home loan products (That’s borrowing options for your home) from over 60 lenders, so you can be paired with a loan that suits your needs and lifestyle. By comparison, a bank is only ever going to offer you the products they have access to.

2. Review Living Expenses

Now it’s time to review what you’re spending on living expenses; This includes groceries, amenities, utilities, and sneaky late-night food delivery services. Your living expenses will affect your borrowing power (more on that later), so you want to have a decent amount of money coming in and reduce the amount coming out of your account.

Working with a broker, you can start putting together a budget and saving plan, so you can confidently enter the market, and know what you can reasonably afford.

3. Explore your Loan Options

No one loan fits all, and during the home buying process, it’s important to find the right loan for your needs. Do you prefer something secure? Or do you want flexibility? Do you want to be able to make additional repayments? There are a number of different loan options and features you can choose from.

• A fixed-rate home loan locks you into the interest rate you entered the loan at for an agreed-upon period of time. It’s a solid solution for first home buyers who favour security and certainty.
• A variable-rate home loan means your interest repayments will vary depending on what interest rate changes your lender makes. This means that if interest rates fall, you end up paying less, but if they start to rise, you may see your interest repayments balloon.
• An offset account is a feature for some home loans that allows you to use savings to offset the interest on your home loan. Any funds in your offset account will go towards repaying your home loan, but will not have any interest charged against them, effectively reducing the interest you pay. You can also access the funds in your offset account at your discretion.
• A redraw facility allows you to make additional repayments to your home loan, potentially reducing the time and balance left on your home loan. You can also access any additional repayment funds, at the lender’s discretion.

You can find out more about these types of loans and features below:

• Fixed vs Variable Rate
• Offset vs Redraw

4. Owner Occupied vs Renting it Out

This is your first home, so you’re likely looking to make it your home. However, there’s always the option to make your first property an investment property.

• By occupying your new home, you may be able to access a suite of government grants and incentives designed to get people into their first home, including the 5% First Homebuyer Deposit Scheme. Many of these schemes are only available to owner-occupiers, however, so you have to intend to live in your new home to benefit from them
• Alternatively, some first home buyers choose to buy their first property as an investment property, somewhere they can afford, and then rent in an area they love. This strategy is called “Rentvesting” and is a popular solution for some homebuyers whose property aspirations are more investment-based. Rentvesting can help you get on the property ladder, without having to sacrifice living in an area you love, while generating a regular rental income, which can be used for your loan repayments.

Keep in mind that if you rent your first home out, you’re ineligible for most grants and concessions.

5. Assess your Borrowing Power

Borrowing power is how much a lender is likely to grant you. Most lenders will provide an 80% LVR, which means they will lend you 80% of a property’s value, with you fronting the 20% as a deposit; however, first home buyers may be able to access grants and incentives that increase that to a 90%, 95% or even in some cases 98% LVR, with you only needing a 10%, 5% or 2% deposit, depending on your eligibility and circumstances.

Larger borrowing power means access to more properties and can make the home loan process more stress-free. Your broker will sit down and work with you to determine your borrowing power and help you develop strategies to increase it.

6. Making the Decision

This is the big, scary part, but also the most exciting. With the work done on saving, building up strategies, exploring loan options, and assessing borrowing power, now it’s time to get out there. Just know your broker is here to guide you through the process and make it as seamless as possible.

7. Supporting Documents

Gather all supporting documentation: PAYG, Bank Statements, Registered ID, Proof of Income.  Your broker will help you provide the documents needed to get moving.

8. Review and Acceptance of Recommendation

Your friendly neighbourhood MoneyQuest broker will provide their recommendation of loan products that, in their professional opinion, suit your needs and preferences. You’ll likely receive several options, of which you’ll accept one. It’s worth noting that mortgage brokers are held to the Best Interest Duty, meaning they are legally required to put you, the homebuyer, first. In some situations, this means challenging your opinion on what’s the right choice. Ultimately, however, you’ll choose the loan you want, with the broker’s professional opinion provided.

9. Finalising your loan

Here’s the fun part of the home buying process. Now that all the hard work’s done, you and your broker will submit your loan application to the lender, alongside any supporting documentation and government grants and approvals you’re eligible for.

If all goes according to plan, your loan will be approved. Ideally, you will receive approval before searching and formally choosing a property, which is called Pre-Approval, and is essential if you want to bid at auction with confidence, as it tells you how much you can spend on a property.  Once you’ve secured a property, your lender will provide formal approval, which is the full, final agreement on your loan.

10. Settlement

Sign the documents and settle the conditions of your loan. It’s worth ensuring you’ve inspected the property or had a property inspector do it for you. Once you’ve settled it’s time to move in and celebrate your new home!

Regardless of your journey, make it start with MoneyQuest. Reach out to your local MoneyQuest broker and get started.

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