November 10, 2020 by Lauren Murphy
So, you’ve made the decision to buy your first home.
You’ve been saving hard and starting to dream about the possibilities of living in a place of your own and not having to pay rent. You’ve looked at places online more than a few times, and maybe even been to a few open houses.
Now what?
There are few things that carry the same financial weight as our first home loan. This can be a stressful time for first home buyers and the process at times, can be a bit challenging.
That’s why we’ve outlined the steps to buying your first home to give you an idea of what’s coming. But remember, nothing can replace the value of finding a mortgage broker you trust to help you through the process.
Step 1: Save your deposit
Before you start looking for your first home, you will need to be financially prepared by saving a deposit. Generally, saving 10% of the value of your first home is a great target since it meets most lender’s requirements. Ideally that 10% has been saved over a minimum period of 3 months which is known as ‘genuine savings’. Showing the banks you can regularly save, means they trust you more to make your loan repayments.
That 10% will be split into 1) your deposit and 2) associated costs. One of the biggest costs will be stamp duty, along with legal costs, strata and building report costs.
Find out more about genuine savings and saving your deposit here.
Step 2: Establish your capacity
It is now time to figure out exactly how much the banks will lend to you, and how much you can afford to repay. This is where you need your trusted mortgage broker to help you work out the details based on several financial factors like how much you get paid, how much debt you have, your living expenses, your assets and more.
It will also be time to figure out what incentives are available to first home buyers in your state. Depending on the value of your first home, stamp duty might be waived or discounted along with potential first home owner grants. Speak to your mortgage broker to check if you’re eligible.
Find out what incentives are available for first home buyers in your state here.
Step 3: Choose your lender and loan product
This is a big step. Choosing a lender and the loan product you like is a big decision. But remember, choosing a loan is not just about rate. Additional considerations, like if there is a fee to pay off a lump sum of your loan, if the rate is fixed for a period or the availability of offset accounts are all important. And sometimes a slightly higher rate might give you all the additional characteristics you want.
This is where a mortgage broker can really save you time and energy. Looking through hundreds of loans online can take hours if not days, of your time (not to mention the fine print). Mortgage brokers have their ear to the ground when it comes to home loans and can save you loads of time finding the right loan to suit your needs and match your goals.
Step 4: Get pre-approval
Having a home loan pre-approval means that your bank has given you a conditional ‘thumbs up’ for your home loan. So, you can go out and look for that dream home, secure in the knowledge of how much you can spend. The pre-approval to aim for is one where the lender has seen proof of your income, debts and other financial factors as this is the most secure.
A home loan pre-approval usually lasts 3 months, so it means you have a firm budget in mind when you’re out there looking for the property you want to buy. It also puts you in a better position to negotiate on price and is essential if you’re thinking about buying at auction.
Once you’ve found the home you want to purchase, your lender will want to know if there is anything major that has changed in that time, like changing jobs.
Find out more about a home loan pre-approval here
Step 5: Make an offer and buy the house
So, you’ve found the house you want to buy - yay! It’s now time to make an offer and hopefully have it accepted by the seller. One of the best recommendations at this stage is to get a pre-purchase pest and building inspection. Thist is a good investment and could save you thousands of dollars in the long run.
Once you have your building inspection done, it’s time to dust off those negotiating skills and secure your house at a price you can afford (enter pre-approval!)
Step 6: Sign and exchange contracts
This is the time to get your final mortgage approval, and organise your side of the deal. Once the offer is accepted, contracts are signed and exchanged. This is also the step in which you will pay your deposit on the property. Most people employ a solicitor / conveyancer to handle the transfer for the property and organise settlement directly with the lender, according to the settlement date on the contract of sale. Once the settlement is complete, your solicitor will need to transfer the name of the property from the seller to yourself (the buyer).
Step 7: Cool off
You now have a bit of time to cool off in case you change your mind and back out of the purchase. This period is designed to give the buyer the opportunity to get any further inspections done on the property and ensure their decision to purchase the property was the right one. If you back out, you may lose some of your deposit. If you have bought at auction though, there is no cooling off - auction purchases are final!
Each state varies on its cooling off period time frames, so it’s important to check with the real estate agent or your conveyancer.
Step 8: Settlement
This is the fun part - settlement is when the keys are handed over and you officially become the owner of the property! Settlement usually occurs four to six weeks after the exchange of contracts and is when the balance of the purchase price is paid to the seller. You are entitled to inspect the property before settlement to make sure the property is still in the same condition as when you purchased it and there have been no major changes to it since.
Now’s the time to cue the celebration and start organising the house warming; you have officially purchased your first home. Congrats!
Get the help you need
As you can see, there are lots of things to consider when you’re buying your first home and the process is not always simple. When you’re talking about hundreds of thousands of dollars, it does complicate the process a bit.
A good mortgage broker will be able to talk you through the process, organise the paperwork for your chosen loan product and do the follow up with the banks. You will need that helping hand when buying your first home.
Mortgage Choice specialises in helping people purchase their first home and find the right loan at the right rate. We work hard to make the process is as easy and stress free as possible. And it’s all at no cost to our customer.
Call us today to book a discussion about buying your first home on 0408 480 562 or email lauren.murphy@mortgagechoice.com.au
