Home loans *gulp*

Finance freaks me out. Trying to sort out money stuff (whether it be tax returns, bills, HOME LOANS) just gets me into a complete tizz and the poor mister has to deal with me freaking out.

But I think the main issue lies with me not fully understanding how it works, and accepting that if things don't happen straight away, that there's always a solution.

So, I've noted down all the steps here to help me out - and hopefully, if you're reading this, it might help you out as well! Please note that all the below comments are just opinions and gathered information from the internet. If you are serious about taking on a home loan, please see a bank representative or a mortgage broker.

The home loan approval stages

Stage 1: Pre-approval

This is usually a very basic indication of your suitability to borrow an amount from a lender. This is in no way a binding agreement from the lender to actually lend you anything. (Note: we got pre-approval a couple of weeks ago, huzzah! Doesn't mean anything more than the paper it's written on, unfortunately...)

Stage 2: Conditional pre-approval

This is a relatively clear indication of a lender's intention to offer to lend you money for a property. It takes into account your personal financial situation but is not a binding agreement from the lender to lend you anything.

Stage 3: Unconditional approval

This indicates a lender's willingness to lend you a specific amount of money for a specific property given your personal situation. It's usually then up to you to decide whether to go forward.

Stage 4: Cooling off period

Details for this vary, and are outlined in your contract. Extensions to the period can be negotiated and are very common. Once the cooling off period expires you must either proceed or withdraw from the deal.

Stage 5: Settlement

Huzzah! The exciting bit. This is where your funds are paid to you, the sale is complete and the property is yours.

The criteria you need to meet for a home loan

So, all in all, looks pretty straightforward. But where it gets tricky is satisfying the lenders criteria to be able to borrow the money.

1. Residency status

You must be an Australian citizen or permanent resident living in Australia. If you are an Australian expats living and working overseas, on a spousal/partner visa, an overseas borrower and/or a temporary visa holder with stable employment, there are options but you'd definitely need to visit a mortgage broker or a bank directly to discuss this with them.

2. Proof of income

To be satisfied that you can meet regular mortgage repayments, you'll need proof that your income stream is adequate. Online calculators are a pile of rubbish - even if they are on the lender's web site, they are more focused on generating an inquiry than giving you accurate information.

3. Proof of secure, regular income

You need to prove that your income level is secure, which can can be demonstrated by your employment history. If you have recently changed to a similar job after a long stint in a similar position, that's fine but if you're on probation or have undergone a major career change, lenders may want to wait before allowing you to borrow. If you're self-employed or on a contract, lenders will review your past income.

4. Loan To Value Ratio (LVR)

If the bank is confident that you can service the loan, they will then consider the unlikely situation of you becoming unemployed, injured or on long-term benefits. They need to be satisfied in this worst-case scenario that they can sell your property for a sufficient amount to recover their loan. They obviously don't want to wait for 12 months for the market to improve and as such, they are usually comfortable with lending up to 80% of the value of a normal residential property. This is known as loan-to-value ratio (LVR). It is possible to increase the borrowed proportion up to 95% LVR for an owner-occupier if the lender takes out lenders' mortgage insurance, at a cost of between 1% and 5% of the property value paid for by you.

5. Savings history

Finally, if you are a first home-buyer or borrower who have no equity in existing property, mortgage insurers want to know if your savings history. If you borrow more than 80% of the value of their property to have genuinely saved at least 5% of the value of their property purchase. Genuine savings include money in savings accounts, share or investments (held for at least 6 months). They do not include first home buyers grant, a gift from parents, the sale of a car or any borrowed funds. While these additional funds can be part of your deposit they are not 'genuine savings".

The next couple of blog articles will explore LVR (Loan To Value Ratio) and LMI (Lenders Mortgage Insurance) in more detail, and outline how these impact on your home loan.

Alfresco flooring

I've always loved an alfresco with timber decking - the look ah-mah-zing! But, the logical part of me says NO. Lots of maintenance (for Joe hah!), more expensive than tiling or pavers.

The timber decking is going to tie in really nicely with the wooden Karndean flooring inside. And it's actually going to make the interior seem longer, as it will look like it's flowing to the outside as we continue the wood onto the alfresco.

We've asked around a lot, and have researched the buggery out of the issue online... and we are definitely doing the timber decking! Quite a few of our mates have it, and said as long as you oil it every 6-12 months (and have chosen a decent wood), it will be fine. We don't have a huge alfresco, so we think it's definitely manageable!

Now for the next issue... WHAT WOOD. We are using the Karndean Merbau inside, which looks amazing. So you'd think the logical choice was to use Merbau outside.

BIG BIG NO!!!!

Why? It's actually now listed as a vulnerable species. The beautiful tropical hardwood species merbau, once so abundant throughout the Asia Pacific region, is today hovering on the brink of commercial extinction due to the increasing demand for luxury hardwood timber products. Unless current trends are reversed, merbau will be largely logged out within the next 35 years. (If you want to read more about this issue, you can check out the Greenpeace article here).

I like to think I do what I can with recycling, looking after the environment and all that. We're going to plan a WaterWise garden for this house, and will eventually have a rainwater tank for watering the gardens. I'm not the best greeny, but I try where I can! So I think Australian sustainable wood is the way to go here.

So it's going to be a no to the merbau. But what are our other options?!

I think the best bet is for us to head to a local timber supplier, along with the Karndean sample, and see what comes close.

Here's some of our options:

Joe's definitely more of the expert with this, so final call will be with him! But from the looks of things, it will be between the Grey Ironbark, Red Ironbark and Jarrah. But now to figure out the costs!!!

I think it's going to come down to us heading down to a timber mill and checking things out, and haggling on the costs.... as we will definitely be building the decking ourselves! (*cough* I mean, Joe and our two dads, with me supervising and providing refreshments, of course!! haha!)

Karndean flooring

I'm an impatient person.... Poor Joe. I'm so keen to drive out to the block every week. Nothing new there, it's still all sand, and titles won't be released til April. But it's nice to look at it and dream! (Until you step out of the car and into the sand while you are wearing thongs or sandals... sand all in your feet, YUCK.)

So I've been ordering heaps of samples! It's like Christmas everytime they arrive. It's FAB. Usually it's just bills or junkmail you get in the mailbox.... now we get presents! FREE presents!

Anyhos, onto this "Karndean" business. It's flooring. And it's VINYL.

Yep, I said VINYL. And guess what! The Karndean stuff LOOKS NOTHING LIKE VINYL. Seriously!! Mind you, the Karndean stuff is way more expensive than the cheaper stuff (you're looking at $25 per sqm versus $70 per sqm, minimum). But, for a fake wood, geeeez it is good!

So, here's the lowdown on why we chose it.

• It doesn't look like vinyl... it actually looks realistic!
• Easily replaced as it uses planks.
• Better wearing than laminate or vinyl - doesn't scratch or mark.
• Better than your average vinyl - doesn't indent with heavy objects on them (planks are super solid)
• All the Karndean ranges have fab reviews (not so much the Knight Tiles but I think they've improved them)
• IT DOESN'T LOOK LIKE VINYL!
• More cost effective than wood
• More hardwearing than laminates and bamboos with high heels!

We went into Trevors Carpets to check out the range on Christmas Eve Day. I just couldn't envision vinyl looking decent - it was driving me nuts! (Seriously, poor Joe didn't hear the end of it!)

But, when we went and saw it alongside the laminate, bamboo
and wood flooring...

You could not tell the difference unless you were on your hands and knees,
with your face near the floor!

So we ordered a heap of samples from the Karndean site. And there's an fantastic interactive floor viewer, very handy! Also works on iPads / mobile if you want to sit in front of the TV with a wine or whatnot.

From everything we looked at on the website, plus everything we looked at in store, plus choosing from all our samples.... we ended up choosing.... *DRUMROLL*

The overall effect with larger areas is pretty schweet!

As a side note, we're finding "Karndean" quite difficult to constantly say... so we're renaming it "Kardashian". Has a nice ring to it - "Kardashian flooring". I'm sure Kim Kardashian and Kayne would approve!

Essastone and Laminex samples

Hoorah! First lot of samples have arrived! I was jumping for joy when I saw them in the letterbox, it was like Christmas had come again!

All teh samples!

The high level idea I've got for the interior colour scheme for the house is based around greyscale, with the dominant colour being white, with accents / pops of black, supported with various shades of warm greys and textures. We're looking at the Karndean vinyl wood floors throughout the kitchen, hallways and living areas (slightly dark Van Gogh, probably the Christchurch Oak?).

So, here's the initial colours / textures / materials for the kitchen bench!

Bench top: Essastone Galileo

Bench base & doors: Laminex Chalky Teak

Floor: Karndean Christchurch Oak

Kitchen cupboard doors: Laminex Polar White Crystal Gloss Clear

Huzzah, here's everything together!

Note: I had to colour this a bit to reflect the actual colours, the photo turned out a bit naff.... but, I didn't do a fabbo job recolouring, bit of a rushed job!

So, here's hoping we don't change our minds! Waiting on my Karndean samples to arrive so we can confirm the floor choice (and, go back into the shop to confirm!). We'll also grab some colour swatches to match up the wall paint. At the moment, we're thinking light soft warm grey, with pure white ceilings and skirting boards (and any other frame type pieces, like doors etc).

Wahooo samples!!!!