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Buying your first Home?

A home is easily one of the most expensive you’ll ever make in your life, so it pays to consider the total costs of buying a property before diving into it. While the homeownership journey has become an uphill battle for many due to rising house prices, research shows Aussies still have high hopes of buying a home.

Getting your foot on the property ladder isn’t a walk in the park — it involves a lot of planning and effort to get the best deal possible. Your home is the biggest investment you will ever make in your life, so it’s important you start things right.

Buying a house is an exciting time. These steps will smooth your way through the house buying process.

Step 1: Know your budget range

The first and most important thing you must do to before even proceeding to buying a property is working out your budget. This step involves a little introspection — you need to take a long, hard look at yourself and your finances and determine what you are planning in the years ahead and how much you can afford to repay.

Do a budget review to identify how much you can afford to save for your deposit.

Next, do some house price research. Getting a general idea of house prices helps you set a goal to work towards. A great savings goal for a house deposit is 20% of the purchase price, plus enough to cover buying costs (see steps 5 and 6, below).

Step 2: Knowing what you can afford to borrow

After determining how much you can set aside for monthly mortgage repayments, the next step is to work out how much you can borrow.

Everyone’s situation is different. How much you can afford to borrow depends on your:

  • income and financial commitments
  • house deposit, plus any other savings
  • credit score and credit report

Be realistic about what repayments you can afford. If interest rates rise, your loan repayments could go up. So give yourself some breathing room.

Step 3: Do your research for deals in the market

If you are working on your own, you have to always explore the market first before signing anything.  Ads on television and radio, newspapers and magazines are great places to find out what deals lenders are currently offering.  When looking for a good deal on a home loan, the interest rate matters. A home loan is a long-term debt, so even a small difference in interest adds up over time.

Step 4: Choose a home loan

The next step is to find the right home loan for you. Borrowers in the market for a competitive home loan need to educate themselves about the different available home loans.

Additionally, borrowers need to familiarize themselves with the different types of interest rates on these loans as well as the product features that can help them in their borrowing journey.

Reflect on why you want to buy. Are you planning to grow your family? Do you want to renovate? If you’re buying with a partner, talk about this together. Being clear about why you’re buying helps narrow down your property search.

Step 5: Have your loan approved

Having found the best possible deal, it’s time to apply for a home loan, attend a loan interview, and get approval. Make sure you have all the necessary documents ready for your lender or broker.

Procedures vary from lender to lender, but it is likely you will be issued with either a ‘home loan guarantee certificate’ or a ‘pre-approval certificate’. This means that, subject to a few conditions, your home loan either has been, or will be, approved when you find the property you want to purchase. One of the main conditions is often a valuation of the property to ensure a buyer isn’t paying too much for a property.

Step 6: look for your home

Now that you know your budget, it’s time to determine how much ‘home’ it’s likely to buy you and in which suburbs you can afford to live in. The real estate section in newspapers, online property listings, and real estate agents are all useful sources of pricing information.

Once you have settled on an area, you should tell a few real estate agents what you are looking for. Remember, real estate agents are employed by the vendor, so make sure you do your own research as well. Domain’s Home Price Guide is a good place to start when looking for price estimates for any location.

Step 7: Request and conduct a home inspection

Once you find the right home, it is time to do the (sometimes literal) dirty work. Conducting building inspections is one of the most crucial steps in buying a home and the most overlooked. If you want to end up with a home that is worth all the money and effort you spent, you have to make sure that you do this step properly.

Homeowners are suggested to arrange for both building and pest inspection, especially when purchasing an established home. This will add to the costs you have to prepare for during the planning stage.

Step 8: Make an offer

If you’re still satisfied with the property after the inspections, it’s time to make your next move. While it is important to be cautious in approaching price negotiations, don’t be too inflexible. After all, you want this property. The last thing you want is someone beating your best bid by a few hundred dollars, knowing that the property is worth much more.

Step 9: Do the legal work

Once you’ve found the property and you have the contract, it’s important that you check the contract carefully to ensure that everything about the property is understood and that there will be no legal surprises after you have purchased it.

Signing a contract without a lawyer looking at it first is madness. If you want to make any changes to the contract, now is the time to do it.

Step 10: Check for government grants

Now that you’ve gone through several steps, you can now take a deep breath and relax. The pace slows a little now as you wait for your legal team to do the work.

For the next six weeks, sometimes less and sometimes more, your conveyancer or lawyer will make enquiries about the property. Survey and drainage diagrams will be examined, government departments will be written to, heritage orders will be inspected, and council checks will be performed. In other words, the work is usually out of your hands.

A kind vendor may grant you additional time if you are having difficulty meeting the agreed deadline but don’t count on it. The chances are that the property is also costing them money (through their own mortgage repayments or lost interest) and they are under no obligation to give you more time. This is the time when buyers and vendors usually get an attack of the jitters. Buyers keep their fingers crossed that everything about the property will be fine and will run according to schedule, and the vendor is praying that the sale goes ahead and they can get their hands on cash.

Step 11: Wait for settlement

Settlement day is the day you or your representative meets with the vendor to swap your cheque with their title of ownership. Cherish this moment, because with most people this certificate will quickly go to your lender, unless you are lucky enough to purchase the property outright.

Government departments need to be notified of the change in ownership, and this is typically taken care of by your solicitor or conveyancer. You should have the building insured at the time of settlement otherwise some lenders won’t lend you money. To remove any ambiguity, a safe course of action is to insure the property as soon as you exchange contracts.

This will be handled by your conveyancer or solicitor in conjunction with your bank and mortgage broker so you don’t need to be there for this to happen.

The title for the property is held by your lender for safekeeping and the keys are available for pick up from the selling real estate agent. If the property is being rented out then the property manager can then commence advertising the unit to prospective tenants.

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