Home Loan application process and things to keep in mind when buying house in Australia

Before choosing home

1. Decide on the suburb
2. Unit/Apartment/Townhouse/House/Mansion/Acreage?
3. Is house located near school and public transportation? 

During Home loan application process

You need to ask these questions before going for home loans.

1. Check your eligibility with lenders - It's better to have a full time permanent job
2. What is the interest rate and comparison rate? What fees I need to pay to find the true cost of loan
3. Fees - annual fees, discharge fees, monthly fees, early termination fees, Prepayment fees
4. Fixed rate or variable rate?
5. Redraw facility
6. Redraw vs Offset
7. Redraw vs Prepayment (Extra repayments)
8. Do you need to pay LMI - Lender's Mortgage Insurance
9. What are upfront costs - stamp duty, first home owner grants - state and federal, legal fee, LMI fee

Steps to buy new house in Australia

1. Get Home loan preapproval - This is valid for 3 months
2. Find the property - Initial Inspections
3. Make offer
4. Seller's Solicitor will create the contract for sale.
5. Review the Contract for sale with the help of Solicitor (conveyancer) and then Sign it. Solicitor fees will range from $1200 to $1500.
6. As per the contract for sale, you will have to deposit 5% or 10% of total purchase value of home in trust account mentioned in the contract.
7. In parallel, Ask the mortgage lender to do Property Valuation. Mortgage lender will valuate the property and based on the valuation, it will decide how much mortgage (maximum amount) to be approved
8. Get Formal Approval for Mortgage from the lender. Most of banks will lend upto 80% of purchase value of house. If you need to borrow more, you will need LMI (Lender's mortgage insurance). In my case, LMI cost me $7000 as I wanted to borrow 90% LVR(Loan to value ratio)
9. Building and Pest Inspection - This cost me $495. If the report mentions defects in the house, you need to ask seller to fix those before proceeding with contract.
10. Get Home insurance (This cost me $40 per month) and get certificate of currency from home insurance provider
11. Sign the mortgage document witnessed by JP and then send it to mortgage lender. 
12. Settlement - That's the final step. 

Timeline

In general, it takes 1-2 months for the entire process.

1. 2 weeks - For preapproval
2. 1 week - Formal approval
3. Contract of Sale - 2 days
4. Contract of Loan - 2 days
5. Settlement date - 4 weeks after signing contract

After settlement

1. Get Home insurance
2. Move in

What do you think on this topic? Please express your opinion or ask any question through comment below. You can write to me at reply2sagar@gmail.com