Buying your first property is a huge milestone. But the many steps, documents and parties involved can make the process seem daunting. We know many in the Pearler community are navigating this process for the first time. Having greater clarity on the process can help reduce the stress and overwhelm from making this big move. While we’re not a home loan provider, we’re here to share some practical steps to help guide you.

This simple, step-by-step guide will walk you through how to apply for a home loan in Australia. Our goal is to provide clear, easy-to-understand information so you can make informed decisions on your home ownership journey.

Step 1: Determine your financial readiness

Before applying for a home loan, look at your finances. It’s important to get your money in order before you kick off the process. This will give you a clearer picture of what you can afford.

Evaluate your savings and income

First, check how much you’ve saved for a deposit . In Australia, most lenders require at least a 10% deposit, preferably 20%. And they might accept less if you pay lender’s mortgage insurance . However, saving more can reduce your repayments and interest. Also, review your income to ensure you can comfortably manage loan repayments. It’s crucial to avoid stretching your budget too thin to lessen the financial stress.

Check your credit score

Your credit score impacts your home loan options. Lenders use it to assess your reliability as a borrower. It’s a good idea to check your score before applying. If your score is lower than expected, you may want to improve it before seeking a home loan.

Know your borrowing power

Use an online home loan calculator to estimate how much you can borrow based on your income and expenses. This will give you an idea of the loan size you might qualify for and help you focus your property search on homes within your budget.

Step 2: Understand home loan types and lenders

Choosing the right home loan is key to buying the right property. It’s worth understanding the different types of loans and lenders available.

Fixed vs variable rate loans

A fixed-rate loan keeps your interest rate the same for a set period. This can make budgeting easier, as repayments stay constant. However, if interest rates drop, you won’t benefit.

A variable rate loan changes with the market. If interest rates fall, your repayments go down. But if rates rise, you’ll pay more. Variable loans also often offer more flexibility for extra repayments.

Or, you can choose a combined fixed/variable home loan, which allows you to split your loan between fixed and variable rates.

Take the time to explore the options to see what works for your circumstances and preferences.

Choosing a lender

Finding a lender is another important step, and there are many to choose from. Research different banks and non-bank lenders to compare interest rates , fees and loan features.

Using a mortgage broker

A mortgage broker can help you find a loan that fits your needs. They compare multiple lenders and can guide you through the application process. While brokers can be useful, also be sure to do your own research.

Step 3: Gather your documents

Lenders need specific documents to assess your home loan application. Having these ready can streamline the process and avoid delays.

Proof of income and employment

Be prepared to provide recent payslips, tax returns, or financial statements (if self-employed) to show proof of stable income. These documents show your ability to make repayments consistently.

Proof of savings and assets

You’ll also need to show evidence of your savings, especially for your deposit. Bank statements highlighting your savings history help demonstrate your financial readiness. If you own other assets, such as a car or investments, include documents for those too.

Disclose debts and expenses

Lenders want a full picture of your financial situation. Share details of any existing debts, like credit cards or personal loans, plus your regular expenses. This helps the lender assess your overall financial obligations and your capacity to manage a home loan.

Step 4: Get home loan pre-approval

Home loan pre-approval can put you in a stronger position when negotiating with sellers. It shows you’re serious and can make your offer more appealing.

Why get pre-approval?

Pre-approval lets you know how much a lender is willing to lend. It’s a conditional agreement based on your financial information, making it easier to focus on homes within your budget. Remember that pre-approval is not a guarantee, but it gives you a solid starting point.

How to apply for pre-approval

Applying for pre-approval is straightforward. As mentioned, you’ll submit your financial details and documents to the lender. The lender will review your credit, savings, and income to give you a pre-approved loan amount. This process can take a few days, so ensure your paperwork is organised. Your home deposit plays a big role in the pre-approval process. Make sure you meet the lender’s minimum deposit requirements, as this impacts your borrowing power.

Pre-approval expiry

Keep in mind that pre-approval only lasts for a certain period , typically three to six months. If you haven’t found a home by then, you may need to reapply to extend your pre-approval.

Step 5: Research and choose a property

Now it’s time to find the right home. This step involves careful research and consideration.

Set a clear budget

As mentioned earlier, your pre-approval gives you a solid idea of your budget. Stick to this amount to avoid financial strain. Remember to factor in additional costs like stamp duty, legal fees, and moving expenses.

Research areas and property types

Think about where you want to live. Research suburbs, property types, and potential future growth in the area. Look at property prices to ensure they match your budget. Online tools and real estate apps can help you compare options quickly.

First home buyer benefits

If you’re an eligible home buyer, consider schemes like the First Home Guarantee , which allows you to buy with a smaller deposit. Make sure your lender is a participating lender as not all lenders offer this option, so it’s worth checking ahead of time.

Attend open inspections

Once you’ve shortlisted properties, attend open inspections to see them in person. Take note of the property’s condition and any repairs it may need.

Choosing the right property takes time, but it’s worth the effort to ensure you find a home that suits your lifestyle and budget.

Step 6: Submit your home loan application

Now that you’ve chosen a property, the next step is to submit your final home loan application – this formalises your request for a loan.

Finalising your application

Submit all the necessary documentation to your chosen lender. This includes your updated financial details, the property contract, and any additional documents the lender requires. Ensure everything is accurate to avoid delays in the approval process.

What lenders assess

Lenders will assess your application based on your financial situation, the property’s value, and your deposit. They’ll also review your ability to manage the repayments comfortably. As mentioned, factors like credit history and income play a big role in their decision.

Application fees

Be aware of potential upfront costs. Some lenders charge application fees, which can vary depending on the type of loan. Double-check these fees before submitting your application to ensure there are no surprises.

Step 7: Property valuation and loan approval

After the lender receives your home loan application, they’ll arrange a property valuation. This is an important part of the approval process.

Valuation process

The lender will usually organise an independent valuer to assess the property and confirm its market value aligns with the loan amount. If the valuation is lower than expected, the lender may reduce the loan offer, and you might need to adjust your budget.

Unconditional approval

Once the property is valued and all checks are complete, the lender will provide unconditional approval. This means your loan is fully approved! From here, you can proceed with buying your home. Keep an eye out for your loan offer documents, which will outline the terms and conditions of the loan.

What to do next

Review the loan offer carefully before signing. Make sure you understand all the details, including repayment terms and any conditions. If everything is in order, sign the documents and return them to your lender.

Step 8: Settlement and finalising the loan

The final step in your home loan journey is settlement. This is when the ownership of the property officially transfers to you.

Settlement process

Your solicitor or conveyancer will handle most of the settlement details. They’ll arrange the final transfer of the property title, ensuring all legal aspects are in order. This includes coordinating with your lender, the seller, and relevant authorities. Settlement typically takes place 30 to 90 days after signing the contract.

Finalise your loan

Before settlement, your lender will confirm that everything is ready to go ahead. They’ll transfer the agreed loan funds to the seller’s account. Once the funds are transferred, you’ll officially own the property, and your mortgage will begin. Your first repayment date will be outlined in the loan documents, so be prepared.

Move into your new home

After settlement, you can collect the keys and move into your new home – or rent it out as an investment property. It’s a moment worth celebrating! Make sure you have a clear plan for managing your mortgage repayments, and keep an eye on your budget as you adjust to home ownership.

Your guide to home loans – what’s your next move?

Applying for a home loan may feel complex, but breaking it down into steps can make the process easier to manage. From assessing your financial readiness to finally settling into your new home, each step brings you closer to your goal.

Staying organised and informed can make all the difference. Take the time to understand your options and work closely with your lender. Home ownership is a big milestone, and with the right preparation, you can approach it with confidence.

You’re now well on your way to making informed decisions throughout your home loan journey. Best of luck as you take the next step!