We know that owning your own home is one the of the cornerstones of financial independence, and for most Australians, it’s a huge achievement.
But, buying your first home can also be a huge challenge. The process of saving for a deposit, getting approval for a home loan,and putting in an offer on a property can be really stressful, but there are some things you can do to make sure you’re prepared and in the best position financially and emotionally, to buy your first home.
These are some tips we’ve put together to help you help you do just that:
Before you buy:
Deposit – Save as much as you can for your deposit. Your target should be 20% of the total cost of the house to avoid paying lenders insurance, which can be up to $28,000 on a $650,000 property. We know this sounds like a lot of money, so if you’re not in a position to save up a 20% deposit, still try to save as much as you can. Every dollar you save will reduce the mortgage insurance cost.
Government incentives – Make sure you know about the various government incentives that are available, such as the federal governments first home loan deposit scheme and state government stamp duty discounts or exemptions. These can help reduce your overall costs and help you put money towards the exciting things like new furniture and décor.
Find a mortgage broker – A goodbroker will help fine tune your savings target and tell you the additional costs you’ll need to plan for. They’ll also show you what the government incentives mean. Working together with a broker also means they will essentially be doing the legwork for you in finding the best home loan rate.
When you’re ready to buy:
Get pre-approval – Work with your mortgage broker to get pre-approval for your home loan. This will tell you how much you can borrow, so you know your limit. And don’t go over this limit unless you have another way of getting together the extra cash. If you make an offer without knowing your spending limit, you risk being declined finance if the bank isn’t willing to give you as much as you’re willing to spend.
Once you do have pre-approval, you’re ready to startlooking and you can offer within your budget.
Have a checklist – Make a checklist of what you want from your new home. If you’re buying a house with your partner, your values are probably pretty well aligned, but make sure you work on this list together. This list can become your best friend andcan include:
- Your preferred location
- Do you want to live close to shopping, train stations, family, and friends?
- The type of dwelling (freestanding house, unit,apartment, etc)
- Number of bedrooms and bathrooms
- What type of lifestyle do you want to live in your new home? Do you want room in the backyard for gardening, do you want to be able to ride your bike to the shops, etc?
Your list should be comprehensive and include everything that is important to you.
Once you have your checklist, highlight the non-negotiables items. These are the things that are the deal breakers. This is a huge investment, so it’s important to stay realistic, but at the same time you want to make sure you buy a house that you know will make you happy.
Engage with real estate agents – Agents can alert you to new properties before they even come on to the market and are advertised. They do work for the vendor, not for you, but getting a heads up on upcoming listings can certainly help to put you ahead of the competition.
Making an offer – When you put in an offer, you’ll need to engage a conveyancer to assist with buying your new home and checking the section 32 provided by the vendor’s agent. Any offer should be subject to any conditions you need to finalise before paying the deposit including:
- Subject to finance (even if you have pre-approval)
- Pest and building inspection (you don’t want to buy a home that has termite damage or structural issues)
- Settlement will also be part of the offer. Some vendors may need a quick settlement, others will be happy to have a longer period so they can find a new home. Make sure you at least have a settlement period that fits with the timeline you need to get things in place.
Paying your deposit and settlement – Once you have your finance arranged, and there are no issues with the building and pest inspection, you’ll be required to pay your deposit. This is typically 10% of the purchase price. You’ll be able to keep saving until the settlement date, which will give you extra funds for your deposit or any immediate changes you’ll need to make on your new home.
Our last tip - be patient when looking. It can take a lot of effort and time to find the right property. Stick to your list and the deal breakers. This will ultimately mean you don’t end up in a home you don’t want!