Process for buying first home

Re offset accounts: yes, in my view, they are very worthwhile unless you are an undisciplined spender or because of your investment strategy will keep the balance near zero anyway.

For my first home purchase, I took out a 30 year loan but aimed to pay it off in 15. Shortly after taking out the loan, there was a death in the family and we received a small inheritance that went straight into the offset account. In the years following, I received promotions more often than I had expected, so my salary increased. My partner and I both had our salaries paid directly into the offset account and did most of our spending on credit cards, taking advantage of the interest-free period and paying it off by direct debit every month: that meant that we weren’t paying any interest in the credit card but saved interest each month on the home loan.
With one thing and another, we ended up paying the loan off in only 7 years but had the flexibility to spend from the offset account wherever we wanted to (home improvements, holidays, etc).

 

Just like I mentioned - they're useless for determining actual borrowing capacity, waste of time using them.

I meant specifically for the property you're interested in, when you're ready to make an offer, not just the general market. Rp Data/core logic property reports can help with this.
Sounds like you've got everything else covered by the previous posts, good luck with it all.

 

@Y-man thanks for all the replies and your insight!! I really appreciate it and clears a lot up in my (newbie) head! I have a couple follow up questions:

I've had a look at a few and am thinking of going in for a chat when I can find the time. These 2 seem popular which are in Hobart, any opinions on them? or is there anything I should be looking for on the site as to them being a good broker?
Finance Brokers of Tasmania | Hobart, Launceston & Burnie | Home Loans
Tassie Home Loans

Also, is there a chance that the broker will be offering loans with higher interest rates? (as they get a better commission from the banks?), Isn't this something that came out of the Royal Commission, or has it been fixed? I guess this is one of the reasons I'm so wary about them.

If that's the case is there any point in starting lower than asking price (in the current market)? If they've listed it as offers over $375K, and I know I don't want to go over $400K, would it make more sense to just split the difference and initially offer something like $385K?

This is one I accept, but don't really get. If you were at an auction you'd always know where the price was at, and if it went over my own personal top, I'd just walk out the door. How does it benefit them not saying where the offer is at? Wouldn't it just save buyers (and agents) time if they knew first hand that the current offer was higher than anything they'd be willing to spend?

What does that actually mean? Does that mean once you sign you can't back out? I've done some reading up and it seams like then you need to have all checks and financing approved before signing. Does this then give the seller the opportunity to accept a new offer while you're getting everything checked and approved? Do you think it makes buying in Tas more risky?

In terms of settlement I'd be ok with whatever settlement date they wanted. Is that the norm? (I mean as long as there was enough time for approvals etc on my end).

This is another thing I had no idea about! I can now see why just going to lots of banks for pre-approval would be a bad idea. So once you’ve been pre-approved, is this just for the property you’re looking to put an offer on? or can you use this pre-approval for multiple properties? So basically what I’m asking is do you have to get a separate pre-approcal for every property you may potentially put an offer on?

 

Thanks @significance !! I had quite a lot of those down, but you've also included quite a few I didn't think off. I had imagined I'd need around $6000 in the back pocket for all the extras and am ok with that.

I know generally what some of these will come to, but can you ask the agent straight out what the current body corporate fees / water / rates etc are? I’ve noticed on some listings lately these are included in the property description.

 

This is also great to know! I was mainly wondering as some loans with offset accounts seem to have higher interest rates than a loan without one, and wondered if the offset was more beneficial than the lower rate. I am very frugal, so know how to save.

Is there any point with taking out a loan for a shorter time period to start off with? like 20 / 15 years? Or is it better to just go for a 25-30 year loan and just put a heap more money into it whenever you can to pay it off sooner (I see a lot of loans have no penalties these days on paying off extra).

 

This is good to know, thanks for your advice!

 

Ok I do understand what you're saying, and do plan on seeing a broker, if not purely to see what they have to say (still going to make up my own mind if their recommendations aren't any good). But I'm curious, what makes you think I wouldn't get approved for $200-$250K? based on the information I have given? I mean I'm not asking for millions and hardly seem like a high risk.

I do have a CoreLogic property report on it, but am taking the values in there with a grain of salt. To me anyway it seems fairly inflated, so that's why I tend to go by the recent sold prices and an averaging in similar properties over the last 6 months. However the median value I came up with of $390K does match up with theirs of $391,369.

Thanks! I think I need all the luck I can get

 

Yes, the agent should have this information and be ready to tell you.

 

You can still go to lots of banks and ask for the best rate they could give you given your circumstances, competitor’s offers, desired loan features and borrowing amount. This doesn’t amount to pre-approval and won’t affect your credit score. They do the detailed credit check after you sign up with them for a pre-approval but can tell you their hypothetical rate for you in particular before going that far.

you get pre-approval for a borrowing amount and then find the place you want to buy. The bank will send a valuer around to check that you aren’t paying more than it’s worth, so final approval is pending that and a few more documents.

 

I think this answers what I was wondering. But still, if I don't get the place I want to buy (offer rejected / too expensive for me etc), but find something else that interests me, does the current pre-approval carry over? Or do I have to get a new one for the next place?

This is something I did not know. What happens if the banks valuer says it's worth higher than my offer? Does this info get passed on to the seller? and will it effect the value of my offer? (i.e will I be expected to offer more?).

 

I was thinking this... but also the opposite, isn't there a chance that it could cost me? in that the Agent just sees the low offer as a waste of time / doesn't come back with a counter / and puts you on a "waste of time" list? That's probably what I'm most worried about, shooting myself in the foot before even getting my foot in the door, as it were.

 

Also, is it still ok to go look at a place without having finance sorted? I'm still thinking it's probably worth checking out the one I have my eye on, even though I haven't as yet got all the other stuff worked out.

 

The pre-approval lasts for a certain amount of time (something like three months) regardless of how many places you look at. The value is sent around only after you have exchanged contracts (i.e. your offer has been accepted).

No. The seller won’t be told. The valuer works for the bank and reports to them. The bank might share the results with you but doesn’t have to. I’m told the value almost always comes in at whatever you have offered. If it comes in higher, the bank would be happy. If it comes in lower but you have a big deposit, the bank might not care and might not tell you: they just need to be satisfied that they’ll get their money if you default.

 

Yes, that’s fine. But if you make an offer before your finances are sorted, make sure that it is subject to finance and has a longish settlement period (say two months+) to give you time to sort finances. A long settlement period might not be what the seller wants, of course, so that might affect whether your offer is accepted.