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July 19, 2021

What You Need To Know About the Process of Getting a Home Loan

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Does the thought of obtaining a loan for a new home intimidate and overwhelm you? It doesn’t have to! Getting a home loan isn’t a scary process when you know what to expect and work with a reputable company that can answer your questions and set your mind at ease.

There are several types of home loans and steps to the process that you should be familiar with before you start out. Your individual circumstances and preferences will determine which one is best for you. Do some research and have a solid idea of what you want in your new home and you’ll discover that each step goes more smoothly than you could have imagined!

Establish a Budget

Before you start to work with a lender, you should have some idea of the amount of money that you can comfortably spend. Think about what you have saved up and the portion of your monthly income that you can devote to a payment.

Remember to factor in a down payment amount and leave some flexibility in your figures to account for the home loan rates that you receive. An extra cushion to cover unexpected expenses and additions that you choose is a smart strategy as well. 

Know Your Buying Power

When you have a rough figure of the amount you can devote towards your new home, you should then focus your attention on the likelihood of being approved for the financing that you need to make the purchase and complete the process.

Your lender will take into consideration things like your employment history and income when they make the decision on how large of a loan they can offer you. Marital status, credit history and debts will be looked at. The better your current financial situation, the greater the possibility is to be approved for a higher amount. A good financial history can also secure you lower home loan interest rates which will save you money over the course of repaying the loan. 

Determine the Type of Home Mortgage Loans You Need

Loans exist for nearly any type of situation. Sometimes special programmes are available for a first-time homebuyer. Some people are looking to upgrade from a starter home and are in a position to spend more money. Others want to refinance the home they currently live in for lower home loan rates. A construction loan is for those who wish to purchase land and build their own home. You should talk to your lender and convey your exact specifications and needs.

After you find the type of loan that is right for you, there are further considerations. Keep in mind that there are various factors to a home loan that will affect your repayment terms. If you are more comfortable with knowing the exact amount you will be expected to pay each month, then fixed home loan rates are a better choice for you. This can be best for those that are working on a stricter budget and need to know exact costs upfront.

Get Pre Approved

A useful part of the loan process is preapproval. Your lender will use the financial information that you have provided, along with their own inquiries, to offer you a potential loan amount. This gives you an idea of what the final number will be so you can start designing the home you want to build. 

Choose Your Home

Once you have established a base amount to work with, it’s time for the fun part! You can explore the areas where you want to live and find a house design and inclusions that fits your criteria. When you are searching for an area to build your new home, remember to consider the distance you will need to travel to work and the proximity to schools, shopping centres, entertainment options and public transport accessibility.

When you are building a home, now is the time to get specific with your design. Be clear about the features and specifications that you want, but let your builder help guide you to ensure compliance and maximise what you can do with your design. They will be able to point out any flaws or weaknesses that simply won’t work and help you come up with alternatives. 

Become Familiar With Home Loan Interest Rates and Fees

After a lot of thought, you have made your decision and found the right area to build your new home! When the final selection has been made, you will need to sign your building contract and put in an offer for your land.

The final purchase price will be settled on and the bank or lender can start to draw up the paperwork to finalise everything. Read every document carefully and discuss the terms of the loan thoroughly so that you understand it well and there are no surprises later. You can work with your lender to find out if your situation is better suited to looking into fixed home loan rates or variable home loan rates. A fixed rate will remain the same throughout the life of the loan, while variable rates can fluctuate along with the market. 

Complete the Process

There are still several steps left in the process before you can move into your new home. When you are building, permits will need to be acquired and regular checks conducted to ensure that everything is being constructed in accordance with the local regulations and codes.

Comply with all of these rules to avoid costly fees. 

You should also protect yourself by purchasing homeowners insurance. Speak to your lender to see if this payment can be included with your mortgage. They can often roll it into one payment when you are settling your terms and home loan rates.

Once you know the basics of obtaining a loan, you can approach the process with confidence. The experts at WOW Homes have over 30 years of experience in helping people build the home they’ve always dreamed of and desired. Call them at 08 9318 6000 today and get going on the exciting journey to create the perfect home for you and your family!