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 time of action at times, can be a bit challenging.
To help, we’ve outlined 8 steps to buying your first home to give you an idea of what’s to come. But remember, nothing can replace the value of finding a mortgage broker you trust to help you by the time of action.
Step 1: Save your place
Before you start looking for your first home, you will need to be financially prepared by saving a place. 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 lenders you can regularly save method they trust you more to make your loan repayments.
That 10% will be divided into 1) your place and 2) associated costs. One of the biggest costs will be stamp duty, along with legal costs, strata and building report costs.
Step 2: Establish your capacity
It is now time to figure out exactly how much a lender will loan you, and how much you can provide to repay. Financial factors that are considered include, 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 obtainable to first home buyers in your state. Depending on the value of your first home, stamp duty might be waived or discounted along with possible first home owner grants.
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 the 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.
Step 4: Get pre-approval
Having a home loan pre-approval method that your lender has given you a conditional ‘thumbs up’ for your home loan. This method you can go out and find that dream home obtain in the knowledge of how much you can use. 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 obtain.
A home loan pre-approval usually lasts between 3 and 6 months, so it method you have a firm budget in mind when you’re out there looking for the character you want to buy. It also puts you in a better position to negotiate on price, and is basic if you’re thinking about buying at auction.
Once you’ve truly found the home you want to buy, 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 home 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-buy pest and building inspection which can cost upwards of $500. I 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 and pest inspection done, it’s time to dust off those negotiating skills and obtain your house at a price you can provide (go into 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 place on the character. The majority of people hire a solicitor / conveyancer to manager the move for the character 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 move the name of the character from the seller to yourself (the buyer).
Step 7: Cooling off
You have a few days cooling off period in case you change your mind and back out of the buy. This period is designed to give the buyer the opportunity to get any further inspections done on the character and calmly make sure their decision to buy the character was the right one. If you back out, you may lose some of your place. If you have bought at auction though, you won’t have the option – auction purchases are final!
Each state varies on it’s 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 character! Settlement usually occurs four to six weeks after the exchange of contracts, and is when the balance of the buy price is paid to the seller. You are entitled to inspect the character before settlement to make sure the character is nevertheless 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!