How to prep before buying into the housing market

man researching how to prep to enter the home loan market

At some point in our lives we get a little twinkle in our eyes and decide, “I want to buy a home”. Just imagine - painting the walls and putting up picture frames without having to ask permission from your landlord! 

As exciting as the realisation is, the endeavour isn’t something that should be taken lightly. It’s important to do the proper research and preparation before you start looking for a home - and applying for home loans. 

Below we've listed things to do before getting into the home loan market.

What mortgage research should you do?

It never hurts to plan and do research before you commit to a major financial decision. That’s why when you are in the stages of thinking about purchasing a home, be sure to investigate the current home loan offers and the general costs associated with them. 

For starters, you should look around the suburbs you’re interested in to see the average price of a house vs apartment, which will, in turn, help you crunch some numbers on how much you'll need to borrow.

So, when looking around it’s important to consider:

  • What type of home you want
  • How long the commute is
  • Is it near amenities like - train stations, bus stops, parks, servos, cafes, convenience stores?
  • Could you see your family living comfortably in the neighbourhood over the long term?

The cost of your potential home will be influenced by the factors above, so it’s good to narrow down what you’re willing to sacrifice and what you absolutely need in a home. 

After you have a general idea of what you want, think about what sort of features you’re looking for in a loan and understand what they mean.

This includes, for example:

  • Offset accounts
  • Split accounts
  • Redraw facility 
  • Honeymoon rates

We have a great jargon buster that could help you understand all the home loan lingo.

Once you get an understanding of the common home loan terms, it’s time to research how long it'll take you to save for a home deposit and how much you can afford to borrow.

You can check this - based on your income - with Mozo’s home loan borrowing calculator. It can help you see how interest rates affect what you can afford to borrow. 

Going into a home loan search with a good estimate of your potential repayments can avoid getting a nasty surprise when it’s already too late.

How to financially prepare to buy a house

Now get your finances in order before you start looking at specific properties, so you have a clear idea of how much you can actually afford to borrow. You’ll ideally want to have a deposit saved up of at least 20% of the property value to avoid paying lenders mortgage insurance

Consider trying out some money tests to see if you’ll be able to handle repayments. For instance, a good test to try (and a great way to save) is pretending that you’re making repayments - while you’re still renting - by budgeting a mock mortgage for 6 months (or more).

For example, your monthly rent might be $1,600 and your hypothetical mortgage repayment is, say, $2,400 plus $600 in insurance and maintenance expenses. 

That’s a $3,000 (mortgage + extra bits) - $1,600 (current rent) = $1,400

So, on top of your normal rent, you should be able to put aside an additional $1,400 into a savings account without it affecting your lifestyle. If putting that extra $1,400 aside is too difficult you might have to reconsider how much you can afford, or if it's the right time to buy a house. Maybe it could also be a sign to work on your budgeting and savings plan.

However, there is more to buying a house than just having the right amount of money for a deposit. Your finances are going to be put under a microscope, so it can help to avoid overspending and build a good credit score from as early as possible.

What to know when getting a home loan

When getting a home loan, lenders are going to review your finances with a fine tooth comb. The lender will check any debts you have, how long you’ve had a stable income, what your credit score is and most importantly, they will check if you’re at risk of defaulting on your loan. 

Home loans are a big financial commitment, so lenders want to make sure you can afford it - especially over the long term. Interest rates may be low in recent months, but it's a bit difficult to predict the future and the last thing a lender wants is for you to default on your loan.

So when prepping to apply for a home loan there are a few things you should check before entering the market:

  • Figure out how much you can borrow
  • Have a home loan deposit saved up
  • See if you’re eligible for home loan grants
  • Check your credit history

If you feel that the points above are good to go, it’s time to start looking for a lender that might fit your needs.

What to expect when entering the housing market

Think of buying a home a bit like finding a new job. Just because you think the house is perfect for you, it doesn’t mean that it’ll be the one you’ll end up with–especially if you’re at a house auction

Just like getting a job rejection, being outbid for the house you wanted isn’t the end of the world. It is part of the journey of home ownership. There are plenty of houses available out there, and eventually you’ll find the perfect one for you. Patience is part of the equation.

If you want to get more knowledge under your belt before you enter the housing market, check out our home loan guides and tips. If you feel like you’re prepared to enter the world of home loans you can start with the ones below or check Mozo’s home loan comparison table.

Home loan comparisons on Mozo - last updated 13 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Variable Home Loan 70

    interest rate
    comparison rate
    Initial monthly repayment
    3.10% p.a. variable
    3.12% p.a.

    Affordable home loan rate for buyers or refinancers.. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 30% deposit required.

    Details
  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

    Details
  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

    Details
  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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