The steps to buying your first home

We regularly help people by explaining the steps when buying your first home.

Even for our clients who have bought before, it can be helpful to run through the steps again.

There can be many ways to buy a house and you may not follow these steps in this exact order but hopefully this gives you some guidance.

STEP 1: CHECK OUT REALESTATE AND DOMAIN

The first thing I usually encourage my clients to do is have a look on the major home buying websites to get a sense of how much homes cost in the areas they are looking.

You will want to check the ‘Sold’ section first.

Even if you’ve bought a house previously, house prices have likely gone up a lot since then so it’s worth getting an idea of what things are selling for before taking any further steps.

STEP 2: SPEAK TO A MORTGAGE BROKER

The next step is to speak to a Mortgage Broker to understand your borrowing capacity. You don’t necessarily need to get a pre-approval, but a good Mortgage Broker should be able to give you an idea of what your borrowing capacity is.

A Mortgage Broker may also have some suggestions on how best to get a loan like closing down credit cards or stopping gambling.

STEP 3: DETERMINE HOW MUCH YOU WANT TO SPEND

This is usually where a Financial Planner will assist.

Whilst the bank will decide how much they are willing to lend you, this doesn’t necessarily mean you can afford this much.

As part of financial advice, we will:

• map out your income and expenses;
• model out changes that are occurring in the future; and
• show how this affects your other goals.

For example, you may be looking to have kids in a couple of years which will severely affect your capacity to meet your mortgage repayments.

If you don’t have a Financial Planner, you may want to sit down and work out what is coming up financially and how much you can afford to put towards the house.

As a general rule, you probably don’t want to be paying off your home for 30 years so want to have a plan to put extra on the loan.

If you’re over 35, you definitely need a plan as you don’t want to be carrying debt into retirement.

STEP 4: GET A CONVERYANCER AND BUILDING AND PEST INSPECTOR

Once you sign a contract, you’ll need to quickly engage a Conveyancer (Lawyer) and Building and Pest Inspector.

Now is a good time to reach out to these people to confirm they are happy to accept you when you’re ready to take action.

STEP 5: START VIEWING HOMES AND DOING YOUR RESEARCH

Finding a home can be an incredibly time-consuming task. Some of my clients have taken literal years to secure a home so don’t be disappointed if it doesn’t happen the first weekend you go looking.

Before putting in offers, it’s probably best to see a few homes so you can get a feel for the market.

During this time, chat to the real estate agents and ask them questions to better understand things such as:

1. How quickly are things selling and how long has this house been on the market?
2. How many offers are they seeing?
3. What are some things about this suburb or type of house to look out for?

If you’re buying an apartment or townhouse, it can also be helpful to understand:

1. What are the strata fees?
2. How much is in the sinking fund?
3. What are the by-laws?
4. If you can get a copy of the body corporate meeting minutes.

If you’re looking to shortcut this process and don’t have the time or expertise, you could engage a Buyer’s Agent to assist.

Once you’ve found a place and are comfortable with this, you can move to making an offer.

STEP 6: MAKE AN OFFER

The best way to make an offer is to contact the real estate agent and advise your intention to do so.

If they expect it’s an offer the Seller will consider, you’ll usually meet with the Real Estate Agent to complete a contract with your offer terms.

There are five big things to consider as part of your offer:

• If your offer is subject to a satisfactory building and pest inspection and how long you have to secure it (such as 14 days)
• If your offer is subject to finance and how long you have to secure it (such as 14 days)
• How long the settlement period will be
• How much deposit you will put down
• Whether you are waiving the cooling off period

The conditions around building/pest and finance depend on how competitive the market is.

From a Seller’s perspective, they would prefer you not to be able to pull out of the deal at all but generally, the shorter the period, the more appealing it will be to the Seller.

For the settlement period, you may want to ask the Seller what their preference is in addition to planning it around your own situation.

Finally, the deposit is optional but a higher deposit shows you mean business. Generally you’ll put down a small initial deposit of $500 or so and a greater deposit after the contract goes unconditional of 5% or more.

Please note: if you make an offer at Auction, there will be different rules.

STEP 7: SEND YOUR CONTRACT TO YOUR CONVEYANCER & MORTGAGE BROKER

Once your offer has been accepted, the Real Estate Agent will give you a signed copy of the contract.

You should immediately send this to your Conveyancer and Mortgage Broker so that they can start the process.

Your Conveyancer will begin doing due diligence investigations and will let you know what they need from you.

STEP 8: ORGANISE YOUR BUILDING AND PEST

You’ll usually only have a limited period of time to organise your building and pest inspection so make sure you do this quickly.

You may choose to be there with them or not. Following the review, they will provide you with a report.

It’s important to remember that no house is perfect and this report will be covering every little thing possibly wrong with the property. You’ll need to determine what’s a big deal and what isn’t.

I’ve found that you can usually call the inspector who will tell you a bit more directly or ask them on the day.

STEP 9: GOING UNCONDITIONAL

If your Mortgage Broker confirms you have been approved for your loan and you are happy with the building and pest inspection, you are ready to go unconditional.

You can notify your Conveyancer of this who will inform the Seller’s Conveyancer.

STEP 10: PRE-SETTLEMENT INSPECTION

Prior to settlement, you should do a pre-settlement inspection. You can contact the Real Estate Agent to line up a time to do this.

STEP 10: SETTLEMENT DAY

There isn’t much you need to have prepared for settlement day.

It’s good practice to confirm with your Conveyancer and Mortgage Broker leading up to settlement day that everything is sorted.

On the day, your Conveyancer will do the settlement and you’ll get instructions it’s gone through and that you can pick up the keys from the Real Estate Agent.

Congratulations, you’ve bought a house!

Don’t forget to organise your move, to get services turned on at the house (such as phone, internet, power, water) and to change your postal address. Good luck!