Home Loan Series 1 - Basics and Step-by-Step Guide to Getting a Loan

How the Australian Home Loan System Works?

Buying a home is a big milestone, and for most Australians, it involves getting a mortgage. But how exactly does the home loan system work? Whether you're a first home buyer, upgrader, or investor, understanding the basics can save you time, money, and stress.

Credit Score & Serviceability

Lenders assess your loan application based on the following factors. Particularly, the "income" and "property value" would be the most important factors and we will discuss these factors in more details in a separate article.

• Your credit score

• Income and job stability

• Living expenses and other debts

• Property value and location

Types of Loans

• Fixed Rate Loans

• Variable Rate Loans

• Split Loans (part fixed & part variable)

• Principal & Interest (P&I) Loans

When you choose a right loan for you, you need to ask understand what your financial goals are. A good mortgage broker can help you identify a suitable lender and loan products that match to your financial goals. A good qualified mortgage broker can:

• Compare multiple lenders and interest rates

• Help with paperwork and application strategy

• Explain complex loan features in simple terms

• Support you before, during and after settlement

  
  

Step-by-Step Guide to Getting a Home Loan

Step 1: Understand Your Budget

• Before speaking to a lender or broker, get a realistic picture of what you can afford.

• Review your income, expenses, and debts.

• Use borrowing calculators to get a rough estimate.

• Aim for at least 10–20% deposit, plus purchase costs (stamp duty, legal fees, etc.).

💡 Tip: A higher deposit (e.g. 20% or more) helps you avoid paying Lenders Mortgage Insurance (LMI).

Step 2: Get Pre-Approval (Conditional Approval)

• Pre-approval gives you an indication of how much you can borrow. It’s not a guarantee, but it shows sellers and agents you’re serious.

• Speak to a lender or a mortgage broker to start pre-approval process (You would be required to provide documents such as payslips, tax returns, bank statements and ID).

• Lender checks your income, credit score, and expenses.

💡 Tip: Pre-approval is typically valid for 3 months (or maximum 6 months depending on a lender)

Step 3: Find Your Property

• With your pre-approval in hand, you can start house-hunting.

• Research suburbs & market trends.

• Attend open homes & auctions.

Step 4: Make an Offer or Bid at Auction

• Private sale: Make a written offer and negotiate with the seller.

• Auction: Bidding is unconditional, so have finance lined up beforehand.

Step 5: Formal Loan Approval

• After your offer is accepted, you’ll need unconditional (formal) approval from your lender.

• The bank will order a valuation on the property.

• If all checks are satisfied, they’ll issue a loan contract.

Step 6: Sign Loan Documents

• Your broker or lender will guide you through signing your loan documents.

• Review all terms carefully, including fees, interest rate, and features.

• Return signed documents to the lender promptly.

Step 7: Settlement

• Your solicitor or conveyancer coordinates the legal work.

• The lender sends funds to the seller’s solicitor

• You get the keys to your new home!

Next in the Series

In the next article, we’ll explore how much you can borrow and how lenders assess your borrowing capacity, including tips to improve your approval chances.

If you have further questions, please contact us (https://www.goodpca.com.au/contact-us). We are also a licenced mortgage broker and can help you with better home loan solutions.

Disclaimer

This content is intended as a general guide for GOOD PEOPLE ACCOUNTING SERVICES clients. The information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, GOOD PEOPLE ACCOUNTING SERVICES disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information.