STEPS EVERY FIRST-HOME BUYER SHOULD TAKE

Breaking into the housing market can feel near impossible for first-home buyers. But fear not, this guide will have you climbing the property ladder before you know it.

Breaking into the housing market can feel near impossible for first-home buyers. But fear not, this guide will have you climbing the property ladder before you know it.

Step 1: Know your finances

You’ll need to be in a healthy financial state to begin down the path to homeownership. This will start with knowing both your incoming and outgoing expenses.

Set yourself up with a savings plan and be willing to make a few sacrifices in order to grow your deposit.

Open a savings account especially for your home deposit. This way you can track your progress while also keeping your living expenses separate.

Step 2: Set a timeframe

Once you have worked out your finances - how much you’re earning, how much you’re spending, and how much you need to buy your home - you will have a pretty good indication of how long it will take you to reach your deposit goal.

Step 3: Know your costs

Go through your expenses thoroughly, from how much you currently pay in rent to the amount you spend on groceries, clothes and even Uber Eats. Know and calculate all of your regular expenses - because you can be sure the bank will do this when you come to apply for a loan. It will help you budget to meet your deposit savings goal as well as your mortgage repayments after you’ve bought.

Don’t forget added expenses of homebuying, such as stamp duty (you’ll be exempt if your purchase is $600,000 or less but you’ll have to pay on a sliding scale if your home is $601,000-$750,000).

First home buyers may be eligible for concession if they are purchasing a home for more than $750,000, which is not yet complete.

There’s also conveyancing fees, pest and building reports, home insurance and lenders’ mortgage insurance if your deposit is less than 20 per cent of the purchase price.

If you buy an apartment or unit, be aware that body corporate fees can be thousands of dollars a year.

Step 4: Get pre-approved

Pre-approval is when a lender agrees that you can borrow a certain amount of money based on your income, expenses and level of savings. This allows you to set a buying budget and narrow down your search for a home.

You’ll also be able to estimate your mortgage repayments.

For most lenders, pre-approval will last between three to six months.

Once you’ve found the home you want to buy, the lender will still need to approve the loan even if the purchase is within your pre-approval limit.

Engaging a mortgage broker can help you navigate this process and pin down the right home loan for you.

But be sure to check the broker is properly qualified and experienced. Also be aware that some are acting on behalf of lenders and might only show you products from those lenders. Ask your prospective mortgage broker how many lenders they work with, what is their commission and whether they are a member of the peak industry group, the Mortgage and Finance Association of Australia.

Step 5: Know the process
 

  • Research the area you want to buy in and monitor the sales so you know what’s a good deal.
  • When you find the “one” and it’s being offered via private sale, you can make an offer. If accepted, you will negotiate a settlement date. If not, you might go back and forth until you agree on a price. If it goes to auction, be sure to have pre-approval before placing a bid.
  • If successful at either auction or private sale, you will be required to pay a holding deposit, usually 10 per cent.
  • A cooling off period of three business days generally applies to private sales. You will be entitled to a refund of your deposit (less $100 or 0.2 per cent of the purchase price, whichever is greater) if you decide not to proceed during the cooling off period.
  • You can also make your offer subject to certain conditions, such as building or pest inspection, or confirmation of your finance.
  • Buying at auction comes with no cooling off period and no conditions.
  • Once the deal is done, settlement is generally two or three months, but can be negotiated to suit both parties. When that date arrives, the final balance is transferred to the vendor and you’re handed the keys to your new home.