If you’re trying to get a loan, you can speed up the process by having everything organised before you apply. This means making sure you have all your supporting documents in order, from proof of identity to payslips, bank statements and details about the property you’re buying.
Here’s a quick rundown of the documents most borrowers need:
Most lenders require you to have some savings to put forward as a deposit towards buying your home. They may also want to know about your spending habits and credit score, so it’s a good idea to get these in check before you approach any lender or mortgage broker.
There are fees and other costs associated with buying a home, and you may need to save some money to pay these upfront, too. That could impact the amount of money you have available for a deposit. These costs can vary between lenders and locations.
Lenders generally like you to have at least 20% of the purchase price of a property as a deposit. Anything less than this and you may have to pay Lender’s Mortgage Insurance (LMI). Typically, this is required to either be paid upfront, from your savings, or it is capitalised into your home loan, meaning you pay it off over time along with your home loan.
There are a few costs and fees to budget for when buying property. Some of these include:
Lender costs. Lender costs vary but usually include application fees, package fees, property valuation and administration fees.
Legal and conveyancing fees. The costs of hiring a solicitor and/or a conveyancer will vary by state and territory, but will generally be large enough to be worth budgeting for.
Mortgage insurance costs. Lenders Mortgage Insurance (LMI) is applied to loans worth more than 80% of the property’s purchase price. The best way to avoid mortgage insurance, or at least to minimise your LMI costs, is to save the largest deposit possible.
Building inspection and report. A qualified expert should inspect the building before you purchase the property. The cost of a building inspection and report will vary depending on the size of the property and the state or territory you live in.
Pest inspection. Again, this should be completed before you purchase the property to ensure the dwelling has no pest-related issues. A pest inspection generally won’t be the largest of your homebuying costs as it’s likely to only cost you a few hundred dollars (depending on where you live in Australia), but it’s still an important cost to be mindful of.
Stamp duty. Stamp duty is a tax charged on the transfer of a property’s legal title between two parties. Stamp duty rates and applicable property value thresholds vary by state and territory, but stamp duty can cost thousands.
Home insurance. You’ll typically need to have a home insurance policy in place for your new property within 24 hours of exchanging contracts with the seller, depending on what your contract says which can vary depending on your state or territory, so be sure to account for any upfront costs or premiums you’ll have to pay between now and settlement day.
Once you’ve settled into your new home, you’ll also need to budget for your ongoing insurance premiums, rates and water charges. If you’re purchasing a unit or townhouse, don’t forget to budget for any applicable body corporate fees as well as your regular home loan repayments.
If you don’t have a credit history (i.e. have never had a car loan, credit card, mobile phone contract or other), obtaining a regular home loan could be tricky but still feasible. Having a credit history demonstrates your ability to repay loans and debts, which is why it’s an important thing to be able to show the lender.