While the steps to purchasing a property – especially your first – can be a lengthy process, there are a few things you can do now to speed up your finances and ensure you’re ready to go as soon as the opportunity arises.
The most effective thing you can do, according to Belinda Williamson, is to have your finance pre-approved, allowing you to get ahead of the pack - property sellers may be attracted to buyers who have pre-approved finance over those who don’t. See our quick guide to pre-approval to help you out.
“Loan pre-approval lets you head into the purchase process knowing the maximum amount you have to spend on the property, giving you confidence to buy at auction or negotiate on price and saving you time looking at places that aren’t in your price range. Keep in mind pre-approved finance is typically a limited time offer and it does not lock you into a loan,” Ms Williamson said.
Getting pre-approved finance is not a difficult process, but it does require preparation and organization. A part of this that trips up first time investors is having the right documentation on hand.
“Obviously you need to have details of your income, your expenses, your assets, and of course your liabilities,” she says. “So it means knowing what debts you currently have outstanding – whether it’s a personal loan, a car loan, a credit card loan – and to also keep in mind with regards to credit cards, it’s not just how much you owe, but also the limit that applies.
“It’s also important to keep in mind that pre-approval has a time frame, it doesn’t last forever. So I wouldn’t apply unless you’re actively looking and ready to go.”
Other tips to help get you going include:
• Knowing your borrowing limit.
• Have proof that your deposit that has been saved and built up over time. Often, just having a large sum of money - whether it be a gift from your parents or otherwise - is not enough.
• Start the savings habit early – having a substantial deposit can help avoid costly lenders mortgage insurance.
• Explore your options. “It is crucial to set aside time with a professional mortgage broker to explore the loan types available to you, including how much you can borrow and the deposit size needed. This will help you to set realistic savings targets and timeframes,” Belinda says.
• Examine the contract carefully.
• Check the contract properly. “Go through the contract with a fine tooth comb and ensure that there is enough time built in for pest and building inspections. If making an offer on a property as opposed to buying at auction, check to see if the contract includes a cooling off period and/or subject to finance clause, and the settlement period suits you and your current living arrangements,” she warns.