Buying a house is a significant milestone and an exciting yet overwhelming experience, especially if it’s your first time.
The process may seem daunting, but you can make your first home dream a reality with the right guidance and planning.
Follow these six steps to make the home-buying journey smoother and more manageable.
Build Up Your Home Deposit
1. How Much Should You Save?
The first step to buying a house is getting your finances in order.
Start by creating a budget to determine how much you can save for your deposit. Then, research the current house prices in your desired area to set a savings goal.
A good benchmark for a house deposit is 20% of the property price, plus enough to cover additional buying costs (we’ll discuss this further in Steps 5 and 6).
2. Ways to Save Faster
Consider cutting unnecessary expenses and directing those funds towards your house deposit goal to speed up your savings. For more strategies, check out guides on how to save for a house deposit.
Remember, a larger deposit means lower monthly mortgage repayments and avoiding lenders’ mortgage insurance (LMI).
Determine Your Borrowing Capacity
1. Factors Affecting Your Borrowing Power
Everyone’s financial situation is different. The amount you can afford to borrow depends on factors such as:
- Your income and existing financial commitments
- The amount of your house deposit and additional savings
- Your credit score and credit history.
2. Be Realistic with Your Budget
Mortgage interest rates can fluctuate, so giving yourself some breathing room is essential when calculating your repayment capacity.
Use online mortgage calculators to understand what your repayments might look like or seek guidance from a reputable mortgage broker. Being realistic about what you can comfortably afford ensures you don’t overcommit yourself financially.
Search for the Best Home Loan
1. Why the Interest Rate Matters
The interest rate on your home loan is crucial because a small difference can add up to thousands of dollars over the loan’s lifetime.
Since a home loan is a long-term debt, comparing different home loan rates is worth comparing.
2. How to Compare Home Loan Rates
- Contact multiple lenders to get personalised loan options. A rate even 0.5% lower can save you significant amounts in the long run.
- Consider using a mortgage broker if you’re overwhelmed by the choices. They can help you find suitable loan options and guide you through the paperwork.
3. Getting Pre-Approval
Before you start house hunting, consider obtaining loan pre-approval. This involves the lender assessing your financial situation to determine how much they will lend you.
Pre-approval typically lasts 3–6 months and helps set a realistic price range, showing sellers that you are a serious buyer.
Start Your Property Search
1. Know Your Needs and Priorities
Think about why you’re buying a house. Are you planning to start a family, or do you want to renovate?
Discuss this with your partner if you’re buying together. Clarifying your must-haves and nice-to-haves will help narrow your property search.
2. Stick to Your Price Range
If you’ve been pre-approved for $500,000, don’t waste time looking at properties priced at $600,000.
Keep an open mind about the location if your ideal suburb is out of reach. Research alternative areas that offer similar amenities within your price range.
3. Do Your Research
Explore real estate websites, talk to local agents, and attend open houses to get a feel for the market.
Patience is key—your search might take several months, so pace yourself and avoid making a decision.
Negotiate and Make Your Offer
1. Understand the Buying Process
Whether you’re buying through an auction or private treaty, it’s crucial to understand the process.
If you’re a first-time buyer, observe a few auctions to familiarise yourself with the proceedings.
Bringing an experienced friend or hiring a buyer advocate can provide valuable support.
2. Reviewing the Contract of Sale
The seller will prepare a contract of sale for potential buyers to review.
Before signing, have a solicitor or conveyancer review the contract to identify potential pitfalls.
This investment can save you from costly mistakes down the road.
3. Building and Pest Inspection
To avoid future headaches, always conduct a building and pest inspection:
- Building inspection: Checks for structural issues, dampness, and electrical safety.
- Pest inspection: Identifies potential termite activity or other pest problems.
4. Making an Offer
When you’re ready to make an offer, you have two options:
- Unconditional offer: A binding contract if you have confirmed finance and are certain about the property.
- Conditional offer: This offer becomes binding if certain conditions are met (e.g., valuation, finance approval, inspections).
Complete the Settlement Process
1. What Happens During Settlement?
The settlement is the final step. The property title is transferred to your name at this step, and your mortgage officially begins.
During this period, your solicitor or conveyancer will finalise the details with the lender and seller. The contract of sale outlines the settlement period, and once complete, you’ll receive the keys to your new home.
2. Stamp Duty and Other Costs
One of the final costs to prepare for is stamp duty, a one-off state government property-transfer tax.
The amount varies depending on location, so use state-specific stamp duty calculators to estimate your payment.
First-home buyers may be eligible for exemptions or concessions, so check the local regulations.
3. Home and Contents Insurance
Protect your new home with home and contents insurance. Some lenders may require this as a condition of your loan.
4. Stay on Track with Your Repayments
Finally, incorporate your new mortgage repayments and ongoing costs, like council rates and land tax, into your budget.
Adjusting to these new expenses may take time, so monitor your spending closely during the initial months.
By following these six steps, you’ll be well on your way to turning your first home dream into a reality. With careful planning and research, you can confidently navigate the home-buying process and settle into your new space.
