Before you start browsing sale listings, it is essential to spend some time on your finances. This involves a couple of different steps which we have outlined below.

Assessing Financial Readiness

Now is the time to really delve into your financial habits and assess how healthy they are. Here are some questions you may need to ask yourself: 

• Do I spend without thinking? 
• Do I work off a budget?
• Do I have a consistent saving habit?
• How much debt do I have?
• What does my credit score look like? 

Reviewing these things and asking these questions will help you determine whether you are financially ready to take on a mortgage. 

If the outcome is less encouraging than expected, don’t panic, with these insights regarding your finances, you can begin to make positive changes. 

This may look like:

• Paying down credit card debts or loans
• Lowering credit card limits or doing away with any credit cards altogether 
• Settling any unpaid debts to improve your credit score 
• Creating a budget and prioritising saving 
• Reducing unnecessary expenditure 

Once you have rectified any concerns and are in a better financial position, you can then reconsider whether buying a home is the right move for you.

Seeking Mortgage Pre-Approval

Conversely, if your financial health and habits are on track, you can begin to look into gaining mortgage pre-approval from your chosen lender. 

Pre-approval is not a confirmed loan, however, it is usually a good indication of what your lender is willing to let you borrow. This aids in understanding how much you can spend on a home and can allow you to make an offer confidently in advance of approval. 

Finding the right lender and mortgage type that is suited to your circumstances can be a challenge, for this reason, many buyers engage the help of a mortgage broker. We will look more closely at mortgage types further on. 

A mortgage broker is capable of reviewing a wide variety of available loans and matching you with the most competitive offer. They also:

• Work out what you can reasonably borrow
• Explain the details of each loan such as interest rates, fees and features
• Negotiate fees and rates on your behalf where possible
• Sort out pre-approval and 
• Apply for and manage the loan through to the final settlement 

As they are paid via a commission percentage, which is covered by the lender, you are not out of pocket for using their services. 

Documents Needed For Mortgage Pre-Approval

To gain mortgage pre-approval you will need to supply a variety of documentation to your lender who will also perform a credit check. Much of what you supply will also be used for the final application once you have had an offer accepted on a home.

You should expect to provide:

• Proof of identity such as your passport, driver’s licence, birth certificate or similar
• Proof of income and employment as evidenced by payslips, a PAYG summary or ATO (Australian Tax Office) assessment 
• Evidence of a deposit or savings with bank statements dating back at least three months
• Details of your everyday expenses such as bills, school fees, groceries, fuel and more
• Information on any current debts such as personal or car loans, student loans and credit card balances
• An outline of any assets you own, for example, cars, jewellery, property, superannuation, investments or furnishings

Your lender may also ask for information regarding the type of property you’re hoping to purchase, the price range you are looking at, the suburbs you are interested in. 

If you are buying the property as an investment they may also want details on how much rental return you expect to receive. 

All of this is used to determine your borrowing power and your ability to make repayments on the loan. The majority of mortgage pre-approvals last for a period of 90 days, after which they lapse and must be reapplied for. 

It is not recommended to apply for pre-approval until you are sure you are ready to buy within the available time frame. 

Continued applications, as with any loan, credit card or finance application impact your credit score, regardless of whether or not they are approved so should be kept to a minimum.

Low-Doc Loan

This type of loan is suited to those who may find it difficult to provide the usual paperwork such as investors or self-employed individuals. Low-doc loans use other sources of documentation to assess suitability but as a result, can be more challenging to secure. 

Guarantor Loan

With a guarantor loan the equity in a parent or sibling’s home is used to back your loan. This can help you secure a loan with minimal to no deposit with the equity acting as its equivalent instead. 

In this scenario, where you have less than 20% of the house price in savings to offer as a deposit, using a guarantor can also see you avoid paying for Lenders Mortgage Insurance. 

Construction Loan

Intended for those who build a new home or carry out extensive renovations, construction loans allow for ongoing payments to be made as different stages of completion are achieved. 

Rather than a lump sum upfront such as with a traditional loan, you can draw down on the loan as needed and in line with the loan’s terms and conditions. 

Interest-Only Loan

An interest-only loan sees you only paying the interest on the loan rather than the principal (actual amount borrowed) and interest simultaneously. This can help to reduce monthly repayments during renovations or free up cash for other expenses. 

Typically only offered for five years, the lender will still assess your overall ability to repay the loan on a principal and interest basis within the loan term.

Fixed vs. Variable Loan

With a fixed-rate loan, you are able to lock in an interest rate at time of settlement for up to five years. A variable rate, as its name suggests, sees your interest rate adjusted as the market changes. 

There are pros and cons to both loan options, with a fixed loan protecting you from rate rises but also seeing you miss out on reduced repayments if they drop below your secured percentage.  

Mortgage Fees & Charges 

No matter which type of loan you end up with, there will be fees and charges associated. Not all lenders follow the same fee structure and the timing for when these need to be paid may also differ. 

These fees can quickly add up, so it pays to read the fine print and be prepared. The main fees to be aware of include:

• Upfront Fees: These include charges such as the loan application or establishment fee, valuation fee (appraisal), legal fee for document preparation, Lenders Mortgage Insurance and settlement fees. 
• Ongoing Fees: An annual or monthly service fee for your mortgage.
• Discharge Fees: You may be required to pay a loan closure fee or discharge fee if you have paid out your loan or have moved on after refinancing with a new lender.

Determining Your House Budget

Once your finances are in order and you have an idea of what you will be able to borrow on top of any savings you may have, it is time to work out what you can afford to spend and create a realistic budget for your new home purchase.

A good approach is to start with some affordability calculations. Look at what your repayments will be each month and factor in interest rate risks by allowing for fluctuating increases.

It is also recommended to add up all of the additional costs that come with buying a home both in the immediate future and long-term. 

These include but are not limited to: 

• Solicitor fees
• Stamp duty (charged on a sliding scale in WA)
• Loan establishment fees
• Pest building and/or handover inspections 
• Moving fees
• Ongoing maintenance costs for the property
• Connection/transfer fees for services and utilities 
• Any expected increases in utility costs such as when moving to a larger home or one with a pool 
• Home and contents insurance 

Defining Your Needs and Preferences 

A component of setting your budget, taking the time to identify which suburbs you prefer and which schools or amenities you desire to be close to is also recommended. 

You should also factor in how many bedrooms and bathrooms you hope to have, whether you are open to renovating or prefer a turnkey property ready to move into. 

Additionally, ask yourself, do you plan to be there long-term or will this be a stepping stone to another property in future? 

By defining your needs and preferences and comparing this against your budget and future plans, you are best positioned to start house hunting intelligently. 

You will be more inclined to weigh up a property fairly and buy based on its merits and suitability, rather than make an emotional decision. Buying emotionally is very easy to do but can lead to disappointment or regret later on.

Budgeting and Saving Resources

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House Hunting

When it comes to house hunting, it can be exciting but often equally as daunting, especially given how fast-moving Australian real estate has become.  Frequently, no sooner have you seen a house listed and it’s under contract before the first open home becomes available. Often this fast-paced market can give you very little time to think things over, so it is essential to start your house hunt fully equipped with information and with your preferences and budget in mind. 

To help you narrow down which properties are worth viewing, and to confidently and quickly make decisions, we suggest:

 1. Researching Neighbourhoods

Ensure your preferred neighbourhood meets your needs in terms of schooling, healthcare, lifestyle, amenities and more. If you intend to live there long-term, how will it meet those needs over time? 

Consider visiting and exploring if it’s an area you are less familiar with and also check out any local community groups online for insights into the neighbourhood. 

If your preferred areas are outside your budget, don’t be afraid to review new areas and spend time in those too. You may be surprised by what you find and may even discover your ideal property at a great price. 

2. Outlining Must-Haves vs. Nice-to-Haves

Hoping for a pool? What about a double garage? Do you really need an extra bedroom? Setting out what features are non-negotiable in a home against those things that would be nice to have, but are not essential, is a must. 

While home buying often comes with some compromises, be sure that you’re not compromising on things you need to make the home suitable for your lifestyle goals. Otherwise, you may find yourself back house hunting too soon or experiencing buyer’s remorse. 

For instance, if you need to commute, compromising on travel distance or accessibility to public transport could become a serious issue in future.

An Alternative To Established Homes

If you find yourself having to compromise on too many things or you’re being faced with outdated homes that need a lot of work that you’re unwilling to do, building over buying is worth looking into. 

Building a brand new home makes it easier to fulfil your wishlist and with a variety of government incentives and grants available to first-home buyers, it can also be more cost-effective. In Western Australia, this can mean reduced stamp-duty and thousands of dollars to put towards your build. 

At Stop Renting Perth, we not only build homes within new subdivisions but also offer land in locations all over Perth. This could see you living in your ideal neighbourhood in your brand-new dream home that ticks all the boxes. 

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When house hunting, you have a few options to choose from. 

1. Regularly review sites such as Domain or Realestate.com for listings and attend open homes alongside other interested parties
2. Register your interest with local real estate agencies and ask them to contact you with new listings that may suit you as they become available.
3. Engage a buyer’s agent who will seek out properties based on your criteria and budget and arrange private viewings

There is no right or wrong way to go about finding the right property, however, while real estate agents are working for the seller, a buyer’s agent will be working for you. 

They can help find properties through their network that meet your needs and make them available for viewing before they are ever listed. Buyer’s agents are also experts in negotiation. Do keep in mind that, unlike a mortgage broker, a buyer’s agent is paid by you for these services. 

Their fee is usually a percentage of the final sale price, but may also be charged as a flat rate fee or tiered rate, so always ask upfront so you know what to expect.

The Role Of Conveyancers & Solicitors 

Buying and selling property always involves the need for a legal professional. You can opt to engage either a solicitor or conveyancer to process your purchase, both are licensed to manage this. 

You should research and choose representation in advance of making an offer on a home as you will need their expertise to review the contract of sale first. 

The contract of sale is a binding legal document that is available while the home is on the market. It may contain a variety of special conditions or demands and as such should be reviewed by a legal professional prior to singing. 

Your solicitor or conveyancer will also:

• Liaise with the vendor (seller), local council and government on your behalf as needed
• Source and review the certificate of title for the property and ensure there are no conflicts, easements, covenants or caveats which may affect how you can access or use your land
• Oversee the contract of sale, including negotiating or adding in any special conditions such as inclusions and exclusions
• Manage any issues arising during pre-purchase or pre-settlement inspections
• Oversee the financial transactions required to finalise the sale
• Calculate and arrange payment of any residual or unpaid rates, land tax or similar 
• Prepare and lodge the documents for the transfer of ownership
• Finalise the settlement and source a new certificate of title confirming your ownership

While solicitor or conveyancing fees are an added expense when buying, their services are essential. 

In Western Australia, conveyancing fees are capped at a maximum payable fee of $2200 and all fees should be discussed upfront before confirming services.

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Inspections and Appraisals

Whether you build or buy, you will need to arrange for building and/or pest inspections before settlement.

If you are buying an established home, an appraisal will also need to be carried out by your lender before your mortgage can be approved. 

Importance of Home Inspections

Pest and building reports for established homes and handover reports for new builds involve having a qualified builder and/or pest inspector check over your home for defects, damage, presence of pests and more. 

They are of critical importance as they can highlight things you would otherwise have missed, some of which can run into the thousands to remediate. 

Imagine discovering only after settlement that your entire roof needs replacing or that there is significant termite damage or live termites within the home? For a new build, you could be facing issues with poorly fitted windows or missing fixtures. 

Ensuring proper inspections and reporting are done before settlement or handover gives you the opportunity to raise these issues and have them addressed. 

Addressing Inspection Findings

Where concerns are raised, your solicitor will liaise with you and the vendor to negotiate remediation works or a reduced sale price.

There is always the possibility that the vendor will decline to address these issues or reduce the sale price. This is why, in some situations, a buyer may opt to walk away from the sale following these inspections. 

While an inspection or handover report can cost a few hundred dollars to obtain, this investment could save you a fortune if serious issues are discovered. 

Appraisal Process

Once you have applied for your home loan an appraisal will be carried out on the property you are purchasing as part of the approvals process. 

Appraisers work independently of the buying and selling parties to determine the value of a property by looking at the home’s age, size, location and condition. They will also review how it compares to other properties in the neighbourhood. 

Nominated by the lender, they attend the property in person and carry out an unbiased assessment before preparing an appraisal report for the lender. 

The cost of having an appraisal is usually covered by the buyer as part of their loan application fees. 

Impact on Mortgage Approval

The role of an appraiser is to objectively assess the value of the property on behalf of the lender. 

If the appraised value of the home is less than the requested loan amount, the loan may be declined. This can occur even if the buyer qualifies for the loan amount based on all necessary factors.

The reason for this is that the bank considers the loan as too high risk. It is possible to contest a low appraisal in some instances, however, this requires swift action and expert guidance to do so successfully. 

In this section, we will look at what happens when you make an offer on an existing home as well as the process for starting a new build with a house and land package. 

Crafting a Competitive Offer

None of us wants to pay more for a home than we need to but equally, the seller wants to get the best price they can too. 

While it is usual to go in with a lower offer than what you can afford to spend initially, you should still make sure your offer is fair and competitive. 

Factor in comparable sales nearby, the age and condition of the home, and land size and use this to guide your approach. 

In a seller’s market, the vendor is likely to receive many offers and will be disinclined to consider an offer that is too low, which could see you missing out. 

On the flip side of that, do not feel compelled to offer above what you are comfortable with or what you consider fair either.  

Contingencies and Negotiations

With your offer, you may like to add a contingency or negotiate certain conditions of the sale. 

For example, this could look like being able to back out of the sale without losing your deposit if the results of a pest and building inspection are unfavourable. 

Additionally, while most settlement periods are around 6 weeks in length, you may prefer to negotiate a longer or shorter term when making an offer. 

These types of contingencies and negotiations are quite common, however, there is the risk that the seller declines these, preferring a less complicated sale. 

Counteroffers and Acceptance

As noted above, rarely does the first offer get accepted. There can be a great deal of back and forth with counteroffers from both sides before an agreement is reached. 

Once your offer is accepted and conditions or contingencies agreed to, you will need to inform your solicitor and await a new contract of sale if needed outlining any changes.

Once signed contracts have been exchanged by the buyer and vendor, a deposit is paid to the vendor’s real estate agent and the settlement period begins. 

What About Buying At Auction?

If you are buying a home at an auction, contracts are typically signed the same day and a deposit of 5% to 10% (varies by state) is required to be paid immediately. Whenever a deposit is paid, this remains held in trust by the agent until settlement is complete. 

You may still be able to add contingencies or negotiate aspects of the sale, however, there is often less flexibility and added pressure as there is no time to review things. 

Opting For A House And Land Package 

If the above makes you feel a little overwhelmed and stressed, you’re not alone! Buying a home can be incredibly stressful with many factors to account for – many of which are outside of your control. 

One way to avoid these stressors is to build via a house and land package. The benefit of building over buying when it comes to the actual transaction, is that it is far more straightforward. 

For instance, our process to build via a house and land package with Stop Renting Perth involves:

1. Meeting for a consultation and discussing available options and learning about your needs and wants in a home
2. Reviewing your finances with our experts to see which package you qualify for
3. Choosing your ideal home design and plot of land in line with your qualifying package
4. Explaining all details regarding inclusions, the building process, how repayments work, when they start and more
5. Signing contracts and begin your new build
6. Receiving the keys once the build is complete, with all details from start to finish managed by us and your conveyancer 

Just like buying a home, building one also allows room for negotiation and offers you more scope for tailoring inclusions or exclusions as needed.

Finalising Finance

If all inspection reports and appraisals are completed without incident, the process of finalising your mortgage approval and securing finance can begin. 

Submitting Documentation 

Formal approval of the loan will be required to secure the necessary funds which will require a new application to be completed. In addition to the documentation provided for pre-approval, you will need to supply the contract of sale. 

Updated proof of income may also be requested alongside other paperwork depending on your lender. 

Assessment By Underwriter

Following a similar process to gaining pre-approval, all of your details will be assessed again by the lender’s underwriters. 

The underwriter’s role is to determine the level of risk in approving the loan. As such involves a careful review of your finances, income statements, cash flow, debts and other liabilities alongside your credit score. 

If any concerns are raised during this, your lender or mortgage broker will advise on these, and where possible, advise on ways to resolve these. 

Usually, any concerns have already been raised at pre-approval, so unless your circumstances have changed, final approval is generally quite straightforward. 

Settlement 

Once your loan is approved and all documentation is provided to your solicitor or conveyancer, it is simply a matter of waiting for the final settlement date. 

You are not required to be present for settlement with your conveyancer and that of the vendor managing this for you. 

Just before settlement occurs, you should be offered the chance for a walk-through or final inspection of the property. 

This is your final opportunity to verify that any repairs have been carried out as agreed and that the property is in good condition with all expected fixtures still in place. If problems are discovered, you must alert your solicitor who will address these urgently before settlement. 

Final Transfer Of Funds And Ownership 

The majority of property settlements now occur digitally, making them faster and easier than in the past. At settlement, the final transfer of all remaining funds will occur with your lender dispensing these to the vendor.

Legal ownership of the property is also transferred, allowing the buyer to take physical possession of the property from that date. 

Once settlement has been processed the vendor’s real estate will be advised and keys can then be handed over to the new owners and moving in can begin.  

Moving In

While you can technically move in on the day of settlement, many professionals recommend against this, as should the settlement be held up, you can run into problems. 

We recommend booking a removalist or organising to move in a few days post the scheduled settlement wherever possible. 

Before settlement, you may also like to consider scheduling the connection or transfer of your services and utilities such as electricity, internet, phone or similar. In WA, your water account will be handled by your solicitor as part of the settlement.  

Doing this will ensure your home is move-in-ready and comfortable from day one. Once in, it’s time to sit back and enjoy your achievements and congratulate yourself on becoming a homeowner! 

Ready To Wave Goodbye To Renting And Start Owning? 

There is so much that goes into buying your own property that it can be easy to feel overwhelmed, however, with the right support and guidance it is achievable. 

Whether you are ready to buy now or hope to in the future, it is never too early to start creating healthy financial habits and investigate your options. 

With the rising costs involved with renting, you may even find you’re already capable of servicing a loan and becoming a homeowner sooner than expected.