How to get a home loan

Article by Mozo

You’ve probably heard that the key to landing your first home is taking out a mortgage but what exactly is the process and how can you find the best home loan deal for you?

In our step by step how to get a home loan guide, we’ll explain everything you need to know about applying for your very first mortgage.

Step 1. Workout how much you can afford to borrow

Your first call of action should be to punch in your details into our borrowing calculator, which will give you an indication of how much providers might lend you based on your income. For instance if you earn $60,000 per annum, our calculator shows you could afford to borrow up to $366,000.

Once you have an idea of your borrowing power, you should take the time to think about how much you can realistically afford to repay each month.

Use our budget calculator to get an idea of how much you’re spending each month and include any regular payments (e.g car loan, utility bills). The budget calculator will show you how much you have left over at the end of the month. If you’re planning on living in the property then you don’t need to include your current rent.

Next have a play with our home loan repayments calculator, which allows you to enter different loan amounts and terms to see how much your ongoing repayments will be. This will help you decide on how much you could comfortably afford to borrow.

Step 2. Save a deposit

Once you have an idea of how much you want to borrow, it’s time to save up a deposit for this amount. The standard deposit recommended is 20%, however saving up this amount might be near to impossible. Thankfully many lenders offer home loans that allow you to borrow up to 95% of the property price.

Let’s take a look at the different deposit amounts on a $300,000 home loan:

5% deposit $15,000

10% deposit


15% deposit


20% deposit


When saving for your deposit you should think about whether you’re purchasing to invest or if you will live in the property, as some lenders have different deposit requirements for investors vs owner occupiers. For instance, with one big bank at the time of writing investors would need a deposit of at least 20%, while owner occupiers would only require 5%.

If you do decide to take out a home loan with a deposit of less than 20% you will be required by the provider to pay for the cost of lenders mortgage insurance. The cost of LMI will depend on who your provider takes out the insurance through and the amount you’re borrowing. You can either decide to pay LMI upfront or add it to your home loan amount.

Other fees that you’ll need to budget for when getting a home loan include stamp duty (a tax charged by your state or territory) and the mortgage application fee if applicable.

Step 3. Check your credit history

Do you know what your credit score is? Most of us don’t. When it comes to getting a home loan it’s essential that you check your credit report by downloading a free copy online. This will allow you to see if there are any mistakes that shouldn’t be on there and whether you might need to clear up any lingering debt that has put a red mark against your name before you apply for a home loan.

Step 4. Avoid changing your lifestyle

Before you apply for a home loan it’s important that you don’t make any sudden changes to your life like changing jobs or taking out a personal loan, as this could affect your chances of being approved for a mortgage.

Step 5. See if you’re eligible for your state’s first home owners grant

If you’re a first home buyer, make sure you check if you fulfil the requirements of your state or territory’s first home owners grant, which generally provides a lump sum payment to go towards your home loan and exemption from stamp duty if you’re purchasing a new or off the plan property.

Step 6. Decide on the home loan type

Before you begin looking for a home loan, you should take the time to consider what your best home loan match will be. One of your biggest decisions will be the selecting the type of interest rate:

Fixed interest rates: Do you want repayment certainty? Then a fixed rate home loan could be just for you, which has the same rate locked in for an introductory period. There are some negative aspects to fixed rate loans, for instance many don’t come with flexibility when it comes to features and some charge an exit fee if you wish to switch loans during the fixed rate term.

Variable interest rates: The other option is taking out a home loan that has a rate that changes according to the market. Variable home loans are popular as they come with flexible features (e.g offset account, extra repayments facility) but they also mean you could be subject to a rate increase.

Split rate loan: If you want a mix of both rate options you can select a split rate loan, which as the name suggests splits one portion as fixed and the other as variable. On the variable portion you can take advantage of flexible features like an offset account and on the fixed rate portion you’ll be rest assured that you have some protection against a rate rise.

Want to know more about the varying home loans available? Read our types of home loans guide for a full rundown.

Step 7. Compare home loan deals online

Don’t fall into the trap of getting a home loan through the bank you’ve been with since the days of your first kid’s account. Instead hop online to see what the best deals in the market are, because signing up with a competitive mortgage deal could save you tens of thousands in interest over the life of the loan.

There are several different ways you can compare home loan packages on Mozo:

  • Home loan comparison tool. This search engine allows you to compare our entire home loan database of over 100 loans in the market.
  • First home loans comparison table. If you’re a first home buyer, you can compare the different home loans available with low deposit requirements and competitive fees and rates.
  • Major banks comparison table. Wondering what’s on offer from Australia’s majors? Then head on over to our major banks table where you can view what’s on offer from some of the big players today.

Step 8. Create a shortlist

After you’ve compared the home loan deals on offer, select a few you like for closer inspection. Don’t just compare the home loans on the headline rate but look at the comparison rate as well which is a combination of the rate and the upfront and ongoing fees. Also check what features the home loans come with (e.g extra repayments facility, redraw facility, offset account), as this could be a major deal breaker.

If you’re tossing up between two home loans, you can use our home loan comparison calculator that allows you to compare them side by side to see which would be cheaper when it comes to the interest and fees you’ll pay over the life of the loan.

Step 9. Get home loan pre-approval

After you’ve picked the home loan, it’s time to organise your home loan pre-approval which once approved is a strong indication you fulfil the provider’s eligibility requirements and you’re likely to be approved for a home loan up to a set amount. But keep in mind “conditional” home loan pre-approval means that the bank doesn’t have to go through with approving you for the loan.

When a provider assesses you for home loan pre approval they will look at your credit history, your salary and any debts. Home loan pre approval means you can make a “conditional” offer on a property, which is subject to finance.

Step 10. Organise formal approval

Things are starting to get exciting! When you’ve found the property of your dreams and secured your home loan pre approval, you can make an offer and if it is accepted you will pay a deposit to the seller and exchange contracts. If your pre-approval is “conditional” you can add to the contract “subject to finance.”

The last stage of getting a home loan is contacting the provider to organise formal approval. The provider will then send you a home loan contract to sign and once you’ve returned the contract to them they will transfer the payment to the seller. When the settlement date has passed you’ve officially taken out a home loan.

Are you a first home buyer after your first property? Head on over to our first home owners hub for helpful hints and tips or kick off your home loan search by visiting our first home loans comparison page.

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