April 23, 2019 by Lauren Kilsby
Buying your first home is a BIG deal. It’s exciting, scary and stressful all at once!
For months or even years, you’ve been saving hard and have started to dream about the possibilities of living in a place of your own and not having to pay rent (or live the parents anymore!).
You’ve spent hours on realestate.com and had many a Saturdays visiting open houses in your preferred suburbs. You may have even started researching local schools for the kids or timed out your daily commute on Google maps.
Basically, you’re ready to buy but as you’re new to this, you don’t know what the right next steps are to make sure you find the right property, at the right price, and get the best home loan deal for your situation.
We get it. Home loans can be daunting. They can be complex and sometimes it’s hard to work out what the differences are between loan A and loan B.
This is also one of the biggest financial commitments you’re ever going to make and it’s one that stays with you for a long time so you want to make sure you get it right!
We want to help get you home loan ready so we’ve outlined the essential steps to buying your first home. This will help give you an idea of what’s coming and what to expect as you buy your first home.
But remember, nothing can replace the value of finding a great mortgage broker you trust to help you through the process. As your local Adelaide Hills home loan experts, we’ve got years of experience in helping our clients get into their first home and we can help you through the process from application to settlement.
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 lenders 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: Work out how much you can afford to pay
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 one of our home loan experts to help you work out the details based on a number of 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 from the South Australian State Government. To find out what grants you may be eligible for visit Revenue SA here.
Step 3: Choose your lender and loan product
This is a pretty big step. Choosing your 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 features you want.
This is where our home loan team can really save you time and energy.
Looking through hundreds of loans online can take hours if not days, of your time. Our home loan experts 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.
A home loan pre-approval usually lasts between 3 and 6 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 actually 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.
Step 5: Make an offer and buy the house
So, you’ve found ‘the one’. It’s in the best location, near the good schools, your local footy club (or your local pub) and you’re ready to buy! Now is the 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 which can cost upwards of $500. We know it sounds pricey, but it 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
Once the offer is accepted, contracts are signed and exchanged. This is usually the time to get your final mortgage approval, and organise your side of the deal. This is also the step in which you will pay your deposit on the property. The majority of people hire 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, you won’t have the option of a cooling off period - auction purchases are final!
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 do the celebration and start organising the house warming, you have officially purchased your first home. Congrats!
Get the help you need from your Adelaide Hills team
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, the process can get a bit complicated. It’s always important to sit down with a mortgage broker you trust to talk through your options.
At Mortgage Choice in Adelaide Hills, we have a team of experts ready to help you. Call us today on 8398 2955 to book an appointment with our team to chat about buying your first home.
