Put a Budget in Place

One important consideration when deciding how much to budget for is the size of your deposit. Most banks and financial institutions generally require you to have a 20 percent deposit, in order to avoid paying any mortgage insurance. This means that on a property worth $500,000 you will need to have saved at least $100,000 – plus enough to cover stamp duty and any legal and bank costs.

There are other options available if you don’t have a 20 percent deposit. Including using a family guarantor and 90% no LMI specialist loans.

When purchasing a property there are a number of costs you need to consider such as stamp duty, title transfers, legal fees, and bank fees.

The largest cost is stamp duty, which varies state by state and is charged as a percentage of the purchase price. For a quick estimate, you can generally allow for 5% of the property value (this % amount increases as the property becomes more expensive)

In some cases, some costs may be partially offset by the first home owner grants (FHOG) which are used to assist first home buyers entering the property market.

Various concessions are available for first home buyers depending on where they buy and the type of property they are purchasing.

Research the Market

Once you have a pre-approval and a budget in mind. It is important to research the market in that area. When you are considering an area, look at services like public transport, educational facilities, and shopping centers.

Distance to the CBD and travel time to work and schools should also be considered. Remember if your goal is to bring up a family in the home then you will want to be close to schools and public transport. Make sure the property meets your personal requirements.

Having a good relationship with Real Estate agents in the area can be beneficial as they can let you know of properties that are coming up before they are advertised.

Choose the Right Home Loan for you

The first professional you should contact is a hfinance mortgage broker. Mortgage brokers will assess your financial situation and determine your borrowing capacity. A hfinance broker can offer you a range of loan products from various lenders, so they can be a good option for a first home buyer especially if you looking for a great deal.

Once the broker determines your eligibility for a home loan, they will provide you with loan options to choose from. The next step is to apply for a pre-approval, usually, pre-approvals will be valid for 90 days.

It is recommended to contact a broker at least 2 weeks before you intend to purchase a property (go to auction) to have enough time to get the pre-approval in place.

Lenders Mortgage Insurance (LMI) is one way of getting into home ownership with a deposit as low as five percent. Rather than having to save a $100,000 deposit on a $500,000 property, you may be able to purchase with a deposit of $25,000. Read more about how a family guarantor can assist.

This means you can get into your own home sooner, begin paying off your mortgage and potentially start building equity. LMI has a one-off premium which the lender will pass on to you to pay. The premium can usually be capitalised to your loan with your repayments adjusted accordingly. Read more about some of the loan types.

Inspections

When looking for your home and before you make an offer, you will want to arrange the necessary inspections. You could consider a: Building inspection (to check for structural damage) – approximately $500, Pest inspection – approximately $400, Strata title inspection (if you are buying a unit or townhouse under strata laws) costs may vary from $250-500.

Contact a Soltcitor or Conveyancer

When you are looking at a property it is best to enlist a solicitor/conveyancer. Your solicitor or conveyancer should advise you on what inspections are recommended for the type of property you are buying. They will also look over any contract signed and guide you through the property transfer if successful.

Speak to your solicitor regarding the amount of the deposit required to be paid when contracts are exchanged. This can often be reduced to five percent, instead of the typical 10 percent, however, this needs to be agreed with the vendor or their solicitor prior to an auction.

Conveyancers will have completed hundreds of property transactions and know the hidden traps to watch out for, like finding out that someone has planning permission to build a 10-story office block next door! The contract will contain a settlement period which is the length of time before you take legal ownership of the property.

Making and Offer

Once you are ready to buy you need to consider if you are looking to purchase a property through private sale or at auction.

Private sale – All of your research will assist you when negotiating the purchase price, however, you probably don’t want to be too inflexible. The last thing you want is to lose the property to someone else for an amount that you would have been happy to pay. Once your offer has been accepted, a holding deposit of approximately 0.25 percent needs to be paid and there will be a length of time known as the ‘cooling off period’. This is a specified time in the contract within which you can walk away from the agreement to purchase the property.

Typically the cooling off period will be 5-10 business days. If you decide not to proceed, you will typically have to pay the vendor a termination fee, which is usually around 0.25 percent of the purchase price. Any deposit you have paid above this is typically refunded. If the cooling off period has expired you will generally not be entitled to any refund of the deposit.

Auction – If you are buying at auction you need to ensure you have pre-approval in place. If your bid is successful you are obliged to go through with the purchase as there is no cooling off period, so make sure you really want the property before you start bidding. Most importantly, don’t exceed your maximum spending limit.

Signing the Contract

If you haven’t already done so you must contact a conveyancer or solicitor and have them check over the documentation for any problems with the property or the deeds at this stage and begin drawing up the contract for the property transfer. Ask your solicitor or conveyancer to explain all items within the contract so that you understand its contents before signing.

The contract will contain a settlement period which is the length of time before you take legal ownership of the property. This can be negotiated but will need to be agreed to by the vendor prior to the auction or signing of contracts.

Many lenders will require home insurance to be taken out from the time contracts are signed. Even if your lender doesn’t require it, it can be a good idea to take out home insurance at this time to help safeguard your interest in the property. Once all questions have been answered, your conveyancer or solicitor will usually set a date and time for you and the vendor to sign contracts and to pay your deposit. The deposit is usually placed into a trust account held by the real estate agent until

Unconditional Finance

Once you are happy with the contract, you should contact your Mortgage Broker and provider them with a copy of the contract and any additional information the lender will require for the finance to become unconditional.

The lender will require a valuation to be completed on the security you have purchased. This is organised through the lender by your mortgage broker. The valuation will determine the security price and you may need to add extra funds if this does not match your actual purchase price.

Building insurance cover will need to be taken out as a requirement of the lender. This will need to occur before settlement. Your mortgage broker can assist you in putting you in touch with an insurance provider.

Once the loan becomes unconditional you will meet with your broker to sign the lenders’ application forms and book in the settlement with the lender and your solicitor.

Before settlement, it may be a good time to think about personal risk insurance cover. You will soon have a mortgage to pay and should something happen to you or your family it is best to have covered in place to provide you with financial protection.

Settlement

The date of settlement for your new home is usually four to six weeks from the time contracts are exchanged. This is the date you take legal ownership of your new home. The balance of the purchase price will need to be paid on the day of settlement, including the closing costs on the property.

Your solicitor or conveyancer will arrange this with your lender who will take the balance of funds to settlement. Generally, the contract of sale will require the vendor to deliver the property to you in the same condition it was in on the day of sale, except for fair wear and tear. It’s a good idea to ensure your contract allows you to conduct a final inspection just before settlement.

You can arrange this inspection with the real estate agent. If anything is not working or has been damaged, discuss it with the real estate agent and your solicitor or conveyancer prior to settlement.

Moving into your New Home

Once the settlement has occurred, the vendor’s solicitors will contact the real estate agent who sold you the property and advises them to give you the keys. This is the time to celebrate and start the move into your new home.