The no-BS guide to buying your first home.
Buying a home is a massive step and it will likely be the biggest financial decision you will make in your life. For first home buyers, it can be a little overwhelming (to say the least) but it doesn’t have to be. And it certainly isn’t as complex as you might think. Before we jump into the steps and information, the most important thing you can do when buying a home is knowledge. Learning as much as you can about the process, options, steps and goals can help you stay in control and out of worry.
This article will help you understand the key steps to buying your first home. For the purposes of this article, we will be focusing on purchasing an existing home, whether that be a unit, apartment, townhouse or mansion. We will be writing another article about building a home in the future.
If you are wondering whether it’s better to buy a home or rent, check out our article: Buying Vs Renting In Melbourne: What’s Better?
1. Setting your goals
You firstly need to decide what type of property you would like to buy. Why are you buying a property? Is it to rent, is it to start a family, is it to enter the property market? You then need to decide which type of property you want; unit, land, home, duplex, apartment etc.
2. Make a plan.
Once you have decided which type of property you would like to buy and why you are buying in the first place; now it’s time to make a plan.
A plan lays the foundation of how you are going to buy the property you want to. This includes how you are going to save for the property, when you would like to purchase and who you are going to purchase it with. This will give you an idea of how much you need to save and when you will realistically be able to buy.
3. Have a chat with a Finance planner
We recommend Hutton Financial, they are a great team with extensive knowledge and experience in the industry. They are both financial brokers and financial planners.
- A finance broker is someone who shops around and gets you the best deal on your home loan.
- A financial advisor who gives you advice about your finances.
- A financial planner is someone who helps you create and stick with a financial plan.
A finance plan will break down everything you need to know and do to reach your end goal; owning a property. This will include how much money you’ll be able to borrow, your income, your lifestyle and any other financial decisions that will impact the amount of money in your bank.
If you want to buy an apartment in 2 years as an investment property, a financial planner will help you reach that goal.
4. Stick to the plan!
Stick to the plan and save for your deposit.
5. Get a pre-approval in place
Once you have saved enough money, it is a good idea to get a pre-approval in place. The best way to do this is by engaging with a finance broker. Financial brokers will find you the most appropriate and best loan for your individual circumstances.
A pre-approved home loan ensures that you can now go out and look for properties valued at or below the approved loan amount.
6. Find a property!
7. Get everything in order prior to purchasing
Before you go spending all of your hard-earned money on your new property, it’s important to get everything in order. It’s not compulsory but it is best to get a conveyancer/solicitor to look over all of your important documentation.
Doing their due diligence by completing building and pest inspections will be in this section as well.
8. Make an offer to buy
Once you have found a place you would like to buy that is within your price range; there are a few different methods to buy.
- Auction – You will need to register your interest with the agent of the property for sale so you are up to date with everything about that property. The auction will be held at a certain place, time and date. You will most likely be up against other bidders and the property is then sold to the highest bidder (as long as it’s over the reserve). This can be quite intense and exciting!
- Private Sale – A private sale is generally less expensive than an auction what are you trying to say here?
A private sale can be more straightforward than an Auction. There will often be an asking price, and like buying a pair of shoes, you can lock it away at the asking price. Although if there’s competition, this can end up very much like a competitive Auction.
Unlike an unconditional contract signed after winning an Auction, a private sale will have a ‘cooling-off’ period. Cooling-off periods give the buyer time to change their mind. With a private sale, you can either deal with the agent representing the owner of the property or deal directly with the owner themselves. – remove this bit, we don’t want to encourage owners to do this.
There is no better or worse method, it is a case-by-case basis and it very much depends on the property.
9. Make a deposit and settle
Congratulations! If you are successful in buying the property you’ll normally need a 10% deposit to give to the agent. This is generally done through an electronic transfer to the agent’s trust account.
You’ll then pass on the property contract to your broker/solicitor/bank and they’ll organise the settlement. Once settlement occurs, the loan will begin and you will start paying your mortgage straight away. In most cases, the bank will set up a separate mortgage bank account.
10. Move in or rent it out.
Now that you are the owner of the property, depending on your plan, you can move in or set up the property as a rental. If you are looking at setting up a rental property, we would love to help!
FAQ about buying a property.
- What happens if I can’t make my repayments? Talk to the bank to work out a plan.
- What happens when I want to sell my house before paying it off? You have to pay the portion of the mortgage you owe. Any money on top of that is yours!
- What about home insurance? As soon as you purchase a property, talk to an insurance provider to cover your house – so it’s covered during settlement. A cover note is issued.
- When can I rent my house out to tenants? As soon as you want, unless you are bound by Government grants you have received. For example, first home buyers force you to live in the property for 12 months before renting out.
Want to read more? Check out some of our other posts:
- Best Suburbs In Melbourne To Invest In 2021
- 5 Things To Consider When Buying An Investment Property
- Rentals Vs Airbnb: Using Airbnb As An Investment Strategy
- 5 tips for buying a property in a hot market