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Congratulations on being preapproved for a home loan! What are your next steps? We spoke to Westpac Mobile Mortgage Manager Joanie Rankin about the journey from pre-approval to home ownership. Here are a few of the steps she recommends:
Choose a lawyer
A lawyer is vital any time you buy or sell a property. Your lawyer can request KiwiSaver funds, review sale and purchase agreements, and check a property’s title and Land Information Memorandum (LIM). They also handle mortgage documentation and the transfer of funds, and many other tasks during the process.
Budget for upcoming expenses
Rates, insurance, maintenance – owning a home is expensive, so start figuring out a budget to meet these new costs. You’ll also need to have some funds available for your ‘due diligence’ (aka research), which usually means a builder’s report and possibly a valuation.
Your lender won’t usually ask for a builder’s report as a condition of your loan, but it might be unwise to buy without one as a thorough inspection can help spot big upcoming maintenance issues, among other problems.
As for a valuation, sometimes one is necessary, explains Rankin.
“If you have a low-deposit loan, or you buy from a private sale or direct from a developer, you’ll almost certainly be required to have a valuation. But in other cases, it’s not always required, so check with the bank.”
Prepare for other loan conditions
Home loans typically come with a range of conditions. Some aren’t fulfilled until the actual sale, but others can be sorted out in advance, which cuts down on last-minute stress. For example, you might need to reduce your credit card limits, or sign up a flatmate.
The bank should also have talked to you about the restrictions on what you can buy, says Rankin.
A preapproval doesn’t give you the green light to buy anything at all. It’s conditional on the property being acceptable to the lender. For instance, studio apartments and leasehold properties might be excluded. Or, for buyers whose finances are stretched, the bank might not accept an unliveable do-up or leaky home.
It’s also worth noting that lenders will typically advise those with low-deposit loans not to buy at auction: “There are conditions on these loans that are hard to meet prior to an auction.”
Find your house
You might be surprised at how much work goes into finding the right house. It can take a lot of research to narrow down a type of property and a location that fits your situation and your budget. Rankin recommends the Westpac First Home Buyers’ Guide and adds that her team has a list of information-gathering questions you can ask real estate agents.
Tell your lender about the property
Always let your lender know what property you’re planning to buy or bid on. They will want to see the draft sale and purchase agreement before you start making offers or bidding at an auction.
“Even with a preapproval in place, you can still be turned down if you buy a real dud, or if the house has a big chunk of unconsented work,” says Rankin. But, she adds, she’s never personally seen it happen.
Once the lender has given you the go-ahead, you can make your offers or bids with confidence. If your offer is accepted, the lawyer will help you handle the transaction itself. When all the conditions are met, on settlement day you’ll be ready to move in.
“The buying process might seem complicated, but we’re here to help,” Rankin says.
“There’s nothing nicer than seeing someone buy their first home – it’s one of the most rewarding parts of my job!”
Westpac MMM Joanie Rankin
The information above is provided for information purposes only. It does not take into account your personal financial situation or goals and is not a recommendation or opinion in relation to home loans. It is recommended you seek professional advice from your accountant, tax, legal, financial or other professional adviser before making any decisions or acquiring a home loan.