Buying your first home: what to understand before you make an offer

Start with your borrowing position

Before looking seriously at properties, it is useful to understand how a lender may assess your position.

This usually includes:

• your income;
• existing debts and credit limits;
• living expenses;
• deposit or available equity;
• employment history;
• credit history;
• the type and value of the property you are considering.

A borrowing estimate is not the same as formal loan approval. Different lenders use different policies and assessment methods, so the amount available can vary. Our Home Loan Repayment Calculator can help you get a feel for what repayments at different loan amounts could look like.

Know how much cash you may need

Your deposit is only one part of the amount you may need to complete a property purchase.

Depending on your circumstances, other costs can include:

• stamp duty;
• conveyancing or legal fees;
• building and pest inspections;
• lender fees;
• settlement adjustments;
• moving costs;
• mortgage registration or transfer costs;
• lenders mortgage insurance where applicable.

The amount and type of costs can vary by state, property and loan structure.

Understand what pre-approval does — and does not — mean

A pre-approval can give you a clearer idea of the amount a lender may be prepared to lend based on the information available at the time.

It can be useful when setting a property budget, but it is not an unconditional approval.

Final approval can still depend on matters such as:

• verification of your financial information;
• lender policy at the time of application;
• valuation of the property;
• the property being acceptable to the lender;
• any changes to your circumstances.

Think carefully before making an offer

Before committing to a property, make sure you understand the terms of the offer and contract.

Where appropriate, obtain independent legal or conveyancing advice before signing.

Finance clauses, cooling-off periods and contract conditions can differ, so do not assume you can withdraw from a purchase simply because finance does not proceed as expected.

The interest rate is not the only thing that matters

A home loan should be considered as a package, not simply by looking at the advertised rate.

Other factors may include:

• fees;
• offset account availability;
• redraw;
• fixed or variable structure;
• repayment flexibility;
• loan term;
• lender policy;
• how the loan fits your longer-term plans.