7 Steps to Your First Home

When you first start to think about buying your first property, you might start to talk to your friends and family about how they purchased their homes.

Next, you'll want to start thinking about where you want to live, and find out what kind of property you can afford to buy.

You might decide to buy a home to live in, or you might decide to purchase a property that you'll rent out as you build equity to strengthen your overall financial position.

Whatever your first home purchase ends up being, here's the path that you'll take to reach your first settlement day.

The First Home Purchase Process

Now that you've made the big decision to buy a home of your own, you'll want to know what to expect during the home purchase process. So here's an overview of each step that you'll take, starting right now, up until when you get the keys to your first home.

1. Saving Your First Home Deposit

Before you can get started on buying a home, you'll need to have a first home deposit and first home buying costs ready to go.

The amount that you can borrow for your first mortagage will depend on your current income and spending. To get an idea of how much you might borrow, you can use this borrowing calculator to find out.

Your borrowing power will help you to set your savings target. You might decide to aim for a 10% deposit, or a 20% deposit. With your budget in place, the savings target calculator can help you work out how much to save each week, and what your home buying timeline will be.

Most lenders will consider your home loan application once you have 3-6 months of genuine savings history, so the sooner you start, the sooner you'll be in your new home.

Starting a regular savings habit mean you get used to setting aside a certain amount each pay cycle, and give you confidence that when you have a mortgage, you'll comfortably be able to meet your home loan repayments.

2. Getting a Home Loan Pre-Approval

With your first home deposit and costs saved, you're ready to get a home loan pre-approval so you can really start looking for your new home.

By getting a pre-approval, before you start looking at homes or making your first offer, you show the vendor that you’re a serious buyer.

A home loan pre-approval also gives you a budget that you can stick within when searching the real estate market.

The pre-approval lasts between 3-6 months, but if you don’t find the home you’re looking for within this time, you can get your pre-approval extended. Just chat to your Home Lending Specialist as you look around and they’ll make sure you’re re-approved if your time runs out.

3. Find the Right Home to Buy

When you're buying your first home, you might have to make some compromises - the important thing to remember is that your first home doesn't need to be your dream home, that can come later on. You should focus on getting a property that meets your needs right now, and allows you to build equity towards your future.

To make sure your home has a good resale value down the track, here's some things to look for:

  • Are you close to transport, medical facilities, schools, shops and restaurants?

  • Is the suburb and adjacent suburbs increasing in value? If you’re buying an investment or think you’ll upgrade soon, what are the vacancy rates for the area - will you easily be able to rent it out?

  • Check with the local council to see if there are any plans for developments that might impact the value of your home.

  • Are you near a commercial area, under a flight path, a school, railway or busy road?

  • Off-street parking affects your car insurance premiums.

  • What’s nearby? Parklands, ovals, a swimming pool?

    These all add value to your property, as do any distinctive features of the property itself.

  • Have a look around and think about how the surroundings might impact your personal privacy at home.

  • You don’t want to end up spending a lot of money on fixing structural issues. Check for damp patches and cracks and see if the neighbouring properties are in good condition, especially if you're buying an apartment. A building and pest inspection can give you peace of mind that you're not buying a liability.

4. Building and Pest Inspections

Before you commit to a property by making an offer, attend an auction where you're planning to bid, you’ll want to have a building inspection and property survey completed.

A building inspector will be able to give you an idea of whether there are any issues that could cost you a lot of money down the track. Some of the things they will look for include cracks, rising damp, leaks, asbestos or drainage problems.

For more information about what's included in the building inspection read about the Costs of Buying a Home.

The other professional service you might engage before making an offer is a surveyor. A property survey will set out the boundaries of the legal title.

It’s useful to know exactly where your new property begins and ends before you commit to a property so you can plan for the future, especially if you plan to renovate, install a shed or a swimming pool.

5. Making An Offer to Purchase

Most properties are sold through a private treaty. This means you submit an offer in writing to the property vendor, through the real estate agent.

There is usually room to negotiate the price of the property. You’ll want to have done your research so that you can negotiate with confidence, based on property values and selling prices in the area, and the results of any inspections.

If you haven’t had time to get all the inspections completed, your offer may include conditions such as ‘subject to property valuation, satisfactory building inspection and legal review of the contract and strata report’.

Making a conditional offer on a property gives you time to check the contract and get inspections done before you commit.

You’ll also include a condition ‘subject to finance’. The final finance approval usually takes a few days to settle once the contracts have been exchanged.

Some tips for making your first offer:

  • Most properties sell at 5-7% below the asking price. It could pay off to make your first offer at 10% below asking price to give yourself room for negotiation.
  • Make the offer in writing. Include any conditions that you want to attach, and the amount that you will pay as the deposit.
  • The real estate agent is obliged to pass your offer to the vendor, so once you’ve submitted you offer you can relax and wait for a response before you have to do anything further.
  • Don’t be tempted to offer above your budget: this is one reason why having a loan pre-approval is so important.

5. Buying at Auction

If your ideal property is up for sale at auction, you’ll want to be emotionally and financially prepared to make a fast and final decision under pressure.

You’ll need to register as a bidder before the advertised auction day.

Negotiate the deposit that you will pay if you make the winning bid with the vendor before the auction day.

You will also need to have a satisfactory building and pest inspection done before the auction day.

The vendor will have a set minimum price. Once the auctioneer says that the property is ‘on the market’ it means the minimum price has been reached, and the highest bidder will secure the contract to purchase, so it's essential that you keep a cool head and don't exceed your budget.

6. Settlement

It usually takes 4-7 business days for the lender to review your application and give an unconditional home loan approval. Once your broker receives the paperwork from the lender, they’ll contact you and make a time to complete the paperwork.

There is a cooling off period for a private treaty - this varies in each state of Australia, so make sure you know how long you have. If you do cancel the contract you usually pay a 0.25% penalty.

During the settlement process, your conveyancer does all of the work to review the contract, negotiate the contract terms, and arrange the legal transfer of property ownership. The role of the conveyancer is explained in more detail here.

The final settlement (when you get the keys!) is usually 4-6 weeks from the date the contract is signed.

7. Congratulations: You’re a Home Owner

The hard work is all done, and all you need to do now is make the preparations for moving in and celebrate your first home.

Now you know what's involved in your first property purchase, you might be ready to learn what your first home buying options are, and how you can get your first home deposit ready.

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