How To Buy Your First Property
The decision of buying your own home is a big one. You might wonder what purchasing a property exactly entails, but don’t worry—I’ll walk you through all the steps!
Ask the big question: Am I ready?
Buying a property is a huge decision to make, as you are putting a lot of money into one place. It also means that you’re settling down for a long time. Before you do anything, ask yourself first if you’re ready for the responsibility of being a homeowner.
These are some factors to consider before deciding:
Job security. Having a secure job helps in getting a mortgage, as lenders will see you as someone capable of paying.
Credit score. Your outstanding debts can also affect your ability to get a mortgage. Do your best to clear those up before shopping for loans.
Are you ready to grow roots? Ask yourself this question. If you have wanderlust, maybe it’s not the time for you to buy a house.
Look into your finances
Once you decide that you’re ready, it’s time to have a talk with an accountant to figure out how much you can afford and borrow from a lender. Talk about your income, savings, loans and the like. Doing so will help you when you start looking for a house.
Get a copy of your credit report and start clearing debts away. Reduce the limit on your credit cards. Start paying off credit cards and loans and minimise them as much as possible. Doing these will help you borrow a larger amount from the lender.
Reach out to an agent
Consider appointing a buyer’s agent. Having a real estate agent by your side will make this process infinitely easier. They have years of experience and knowledge to help you out in choosing the right home for you. They can help you decide on the method of purchase you can use. They can also do background checks on properties, negotiate with sellers, and point you in the right direction. Agents can help make a stressful time less stressful.
Know the costs associated with buying a home
Remember that you won’t only pay for the deposit and the mortgage, there are a lot of costs coming from buying a house. Here are some of the costs you will likely incur:
Fees. You will need the help of an agent for the whole process and a conveyancer for the legal parts. You might want to set aside at least $2000.
Deposit. You need to come up with ten to twenty percent deposit. If you want to avoid paying Lender’s Mortgage Insurance, you need at least 20%. While you can have a lower deposit, this will make your mortgage insurance higher.
Stamp Duty. This amount depends on where you live and is applied on the selling price of a property. You can use stamp duty calculator to have a specific amount.
Financing costs. If you don’t have at least 20% deposit, you need to pay for LMI to protect the lender. Aside from that, you need to set aside money for mortgage application and valuation, which could cost $1100, combined.
Inspections. To make sure that a property is pest free and structurally sound, it needs to be inspected. You need to get a building and pest inspection. Those two inspections can cost up to $700 combined, but that’s better than spending thousands on repairs if you don’t get the property inspected.
Other costs. Moving, mortgage repayments, council rates, utilities, and maintenance are only some of the hidden costs of buying a home. Make sure that you’ve set aside enough money for those.
Seek advice from a lender, accountant or financial advisor to know the full extent of costs you will likely incur.
To help lessen the costs, see if you are eligible for the first home buyers grant. This is a national program where the government will grant you money if you’re buying a property for the first time. Make sure to check your state’s requirements before applying.
Know what you want
This will make sure that you have a clear sense of what you’re looking for so that you won’t be swayed by your emotions when looking for a home. List down the non-negotiables and must-haves in the home you want like this one below:
Location. The home should be close to your work, children’s school, to family and friends. You should also consider property prices in each suburb you’re interested in.
Accessibility to public transport, shops, and services. Will it be easy for you to go to and from work and do other errands?
The neighbourhood. Do you want a busy or laidback neighbourhood? Is it safe there?
Type of property. What type of house do you want? A townhouse, a small one, or a home with a sprawling yard?
Style and design. Do you want a modern home? Do you want something vintage or something to renovate?
Amenities. How many floors? How many bedrooms and bathrooms? How many parking spots? Do you want a deck?
Shop around for a mortgage
After knowing what you want in a home, it’s time to look for a loan to finance buying it. Make sure to ask about the following:
Term of the loan. How long will you pay for the loan?
Interest rate. How much is it? Is it fixed or variable?
Additional repayments. Can you make additional repayments? If so, are there conditions?
How is the interest calculated?
Make sure that you understand all the terms before choosing a mortgage. Don’t hesitate to seek the advice of a financial investor.
Get your loan pre-approved
Secure your lender’s pre-approval by providing your financial details, such as savings, income, credit report, and investments. Getting your loan pre-approved before looking for a property is a smart move. Doing so will set your price range and gives you an edge as sellers want a buyer who has secure financing.
Now, after all the preparation, you can now look for houses! Once you have a property type and price range in mind, you can narrow down your choices.
Of course, you won’t buy a home without seeing it in the flesh first. Here are some things you should watch out for during an open home:
Roof, gutter, and drains
Make sure that they are all functional and safe. Also, take the opportunity to ask about the neighbourhood and the costs of living there—in terms of transport, shops, and utilities. And most importantly: don’t let your emotions overtake logic.
Purchasing the home.
If you’re sure you want a particular property, you might want to have a professional inspect it. Also, a conveyancer can check contracts, the title, and other legal matters. A valuation can also help you determine the right price to offer.
Once all of those are done and have no issues, you can now make an offer! Remember to not low-ball the offer, as it will make the seller to not consider you altogether. Talk to your agent about your offer and the deposit amount before making an official offer. If the seller agrees to the offer, you now have your first home! After exchanging contracts, settlement, paperwork, and payment, you can move into your new home.
Good luck on your home-buying journey! I hope that you find the home of your dreams! If you need help with doing that, you can drop a message anytime!