Being first home owners is the goal for many Australians. To achieve this dream you need to do some preparation, and progress through each of the following steps:
Step 1: Building from a solid foundation
Working out your goals is an essential first step to succeed in buying your first home. Having a checklist of each step with defined time frames to achieve them, will give you a framework to work within. Ticking off each successful mini-step will keep you motivated and bring you closer to having your own home.
The most important element of building a solid foundation is to know your current position financially. Understanding how you spend your income determines how much you can save towards the upfront costs and how much you can afford to put towards your home mortgage each month. Working out your budget will help you clearly see where your money is going each week, and identify opportunities to minimise wasted funds. Budgeting does require discipline, but remember your final goal of having your own home.
When working out your budget you need to be thorough and realistic. You need to determine how you spend your money to formulate a plan. Seriously, you need to account for everything. Note every item, you will be surprised how the little things add up. You may want to consider adding the individual items under broader headings of Food, Entertainment, Transport, Rent, Savings, etc., so that you can easily work out the totals. Remember to consider unforeseen circumstances such as car repairs or illness. When you have worked out how your monthly budget you can determine how much you will be likely able to borrow.
Step 2: Research mortgage options
OK, so you have roughly worked out how much you can borrow, and how much of a deposit you will need to have saved before you need to think about borrowing. Congratulations, you have completed Step 1. You are now ready to start researching mortgage providers and shop around for the right loan.
Choosing a lender can seem overwhelming, but there are a couple of options we recommend you consider to make it easier to choose the right one.
- Contact your bank (plus others) and let them know you are planning on buying your first home, and see what they can offer you. Take notes for future reference.
- Ask friends for their recommendations of mortgage lenders. Referrals are the most candid and efficient way of knowing how lenders treat their customers, and the likely service you will receive.
- Getting a better understanding of mortgage products from specialist reviews and magazines. This research will give you an awareness of the mortgage options available.
Another valuable option to consider is a mortgage broker. Again, you may be able to get referrals from friends and family, or a trusted advisor. Having a mortgage professional review your position early on can provide you with options you may not be aware of. Mortgage brokers will consider your individual situation and can suggest several loans that will suit your needs.
When you have selected a lender and mortgage product, you are ready to apply for pre-approval. This will allow you to move forward with confidence when you are ready to start looking at property options.
Step 3: Property Options
Before you jump into looking at properties, you need to carefully consider suitable suburbs for your first home. Talk to family and friends about the suburbs they live in, read property magazines. Websites such as Real Estate and Domain provide helpful suburb information including price averages. This data will help you formulate which suburbs meet your needs, aspirations and financial requirements.
Once you have formulated a solid view of your preferred suburbs, contact real estate agents in that area. Confirm that there is property available in your price range, and sign yourself up for their daily and weekly property alerts. Have a conversation with the agent, clearly communicating your ‘must haves’ and that you have pre-approved finance in place, which allows you to move quickly on properties you like.
At this stage, you can also consider your best options for legal representation. You should obtain several different quotes, and select a professional you are totally comfortable with. The best way to do this is to get recommendations from both family and friends.
Having established your price range, you should become familiar with what is available for that amount. Attend open for inspections in your selected area, with a ‘home buyers’ checklist, take notes and photos of each visited property. Recording pros and cons of each property will help you focus on the property fundamentals, rather than the aesthetic of how the property is decorated.
It is important that you allow yourself time before making offers on your favourite properties. Building your knowledge in the initial steps will help you clearly see the value of property in your local market, and help to ensure that you stick to your budget limits. This will give you a position of strength when you finally find a property that you can afford and meets your requirements.
Step 4: Due diligence
You’ve done the background work on your chosen area and you’ve found the right home, now it is time to bring in the inspection professionals. This process will likely cost you between $200 and $600. Do not ignore this process. This step can save you wasted time and money now and in the future by alerting you to any hidden nasties (damp, movement, termites, faulty electrics and plumbing). Knowing this upfront enables you to consider any repairs as part of the property cost, and potentially give you ammunition to negotiate on price. Without this upfront knowledge, you are exposing yourself financially for the long term.
Step 5: Ready to move forward
Now that you are confident that the property is sound, you should update your solicitor that you are considering putting an offer in for a specific property. Remember the real estate agent is working for the seller, but they can indicate if the vendor is prepared to negotiate on price.
The property magazines and websites will indicate the average discount for your selected area, which is a good guide. Depending on whether it is a buyer’s market, you may be able to negotiate the vendor down further, and your property inspection report may support additional reductions.
Once the final sale price has been agreed, you’ll need to contact your legal representative. DO NOT sign anything until your solicitor checks the sale contract. If you are purchasing at auction, ask for a contract in advance so that any special conditions your solicitor deems necessary can be considered and added if appropriate.
When your legal representative approves the contract, and you have written loan approval from your lender, it is safe to make the deposit payment. Contracts between vendor and purchaser are then formally exchanged. Special circumstances aside, you are now legally required to go ahead with the purchase and will face severe penalties, such as the loss of your deposit, if you do not. Your solicitor or conveyancer will now make final checks on your property, including rates, heritage orders, etc.
Waiting for settlement allows you to finish the last steps of your original list of goals. Prepare change of address information, and obtain quotes for removalists and trades required for any urgent repairs. NOTE: It is not recommended to undertake any work at the property prior to settlement.
You and your vendor’s legal representatives finalise settlement with your mortgage lender to exchange payment and sign the mortgage and related documents. Congratulations, you are now first home owners!
Vizion Group Qld is a highly respected local Sunshine Coast development company, offering first home owners a quality, attractive, affordable home in a highly desirable location close to local amenities. We provide you with one point of contact throughout the entire process, including regular updates showing progress. Buying your first home doesn’t have to be a stressful experience. Contact us today to discuss your needs and become first home owners.