If you’re thinking about dipping your toe into the housing market, you may be wondering where to start when buying a house for the first time. In today’s blog, we thought we’d take a deep dive into the property buying process, and what steps you can take to ensure your journey to homeownership is simple, straight forward, and stress-free.
Where to Start When Buying a House for the First Time
Work out what kind of home you’re looking for
When it comes to ‘where to start when buying a house’, you’ll first want to have a clear idea of what you’re looking for. Though this sounds like a no brainer, it means factoring in your plans as well as taking a look at your current financial situation. Having a clear idea of what you are comfortable to afford as a mortgage repayment is important and to work this out you should prepare a household budget.
It is also worth doing basic research about the property prices in your local area which these days can be quickly done quickly. Online research is a starting point but when you have a rough idea of what sort of property you are seeking its better if you can also attend open houses as properties are always a little different in person than they appear in the photos.
Work out how much you can borrow
Working out how much you can borrow primarily depends on your income and your current monthly expenditure. A rough guideline is you pay no more than 30% of your weekly wage on a mortgage repayment or no more than 4 times your yearly income i.e., if you and your spouse make a combined $120k a year, you should aim to borrow up to $480K but in many cases you can borrow more than this. Everyones situation is different and lender gudelines are complex so its best if you can prepare a budget as to what mortgage repayment you can afford and talk to a Mortgage Broker who can give advice about your unique situation.
Save for a house deposit
After you’ve worked out approximately where you’d like to live, what type of home you’d like to own and how much you can comfortably borrow, you’ll need to get your financial affairs in order. To obtain the lowest interest rates, it’s better if you have at least 10% to 20% of the deposit saved. Particularly for first home buyers a large deposit can be difficult so its possible to borrow up to 95% of a properties value if needed.
Find the best home loan rate
With the help of a mortgage broker, it’s worth shopping around for a competitive home loan rate rather than going straight to the bank. Though many prospective owners feel more comfortable going to a familiar bank for a loan, they often miss out on better deals by not browsing loan options. Even a home loan rate that’s 0.5% lower can save you thousands a year, so it is worth going through the options before you make a decision. A mortgage broker can also offer advice on the best type of loan for you and find a lender that’s guidelines are more suitable for your unique situation.
Find a house to buy
Now for the exciting part – finding your home! Once you’ve agreed to a suitable loan term with your lender, you can start browsing the market for your first home. Remember to stick to your budget, be prepared to negotiate for a better deal and not to get influenced too much by emotions.
Arrange an inspection
Though it may be love at first sight, you never know what a perfect property can be hiding. This is why it pays to have inspections conducted, to ensure you’re not locked into a deal that’s going to cost you in the long run. We recommend having a building and pest inspection performed, as well as legal checks for any restrictive covenants and easements.
Sign the contract of sale
For this part of the ‘where to start when buying a house’ process, you’ll likely need the help of a solicitor or conveyancer. A conveyancer can review the contract of sale, arrange necessary searches and manage any disputes of queries and the settlement process.
Make an offer
Once the contract is reviewed, you’re free to make an offer. This will either be one of the following:
Conditional: The offer will go ahead if the home meets certain conditions i.e. subject to finance or subject to passing a pest and building inspection.
Unconditional: The buyer is prepared to purchase a home without it meeting certain conditions.
Settlement
Both parties agree to a settlement date, which is when the deed is transferred to the buyer and the seller receives their payment. Once transferred, you’ll receive the keys to your first home!
We hope our article on ‘Where to start when buying a home’ has given you a clear idea of the property buying process. If you’re interested in applying for a first home buyer mortgage, you can contact Oak Tree Finances on 0404 403 066 or via our online form, and one of our mortgage brokers will be in touch shortly.