1. Do your market research
Cynthia Sajkunovic, a real estate agent at LJ Hooker in Unley, South Australia, says it’s important to do your market research prior to starting your house hunt.
“Know the area you want to live in and go along to auctions and inspections in that area,” says Ms Sajkunovic.
“Get some knowledge about what is a fair market price.”
2. Devise a budget
Decide how much you’re willing to spend on a home, so you have an idea of the sort of deposit you will need.
The general rule of thumb is that you’ll need to save 20 per cent of the purchase price, but check with your bank before settling on this figure (Depending on your circumstances, you may require a different amount). If you do decide to go with a deposit of less than 20 per cent, you’ll be required to purchase lender’s mortgage insurance. Lender’s mortgage insurance, or LMI, protects the mortgagee in the event that the mortgagor is unable to meet the repayments.
When saving for your deposit, it’s a good idea to set up a separate savings account specifically for the purpose – make it your goal to put in regular deposits.
It’s also worth checking if you’re eligible for the first homeowner’s grant. The criteria varies from state-to-state, so visit this website to potentially save yourself some money.
Ensure you’re also prepared for additional fees like mortgage registration fees, stamp duty, insurance, lenders’ application fees and miscellaneous costs like pest inspectors or removalists.
But don’t be too hard on yourself.
“Don’t put all of your eggs in one basket,” Ms Sajkunovic says. “Leave money aside for dinners out and other enjoyable things.”
3. Get pre-approval for a loan
“What a lot of people forget to do is get pre-approval from the bank,” says Ms Sajkunovic. “Go in and organise this first, so that when you see a property you like you’re in a position to make an offer.”
When you have your appointment to secure pre-approval, the bank representative may ask you about the following details:
• Your employment:
– How long have you been in the role?
– Is it a permanent or casual / contract position?
– Is it a full-time or part-time job?
• What type of property do you want to purchase?
– Where are you looking to purchase?
– Do you want a flat, unit or house?
– How many bedrooms / bathrooms / car spaces?
• Your finances
– Do you have any debts, e.g. money owing on credit cards?
– What are your weekly expenses like?
– Do you have a partner with whom you share finances, or any dependents?
– You may also be required to provide supporting documentation, such as a recent pay-slip.
This is also a good time to enlist a mortgage broker to help you make the right decision about where to get your loan.
4. Find your perfect property and ask the right questions.
When looking for a property, have clear priorities. Know what features you would like and where you are willing to compromise. For example, if you find a home close to great schools for your kids, you may be willing to give up your dream of a study.
Proximity to public transport is key, according to Ms Sajkunovic, as it maximises re-sale potential.
It’s also good to have a back-up plan in case paying off your mortgage becomes a struggle.
“Make sure the second bedroom is leasable and you have good living space in case you need to get a tenant in to split costs,” Ms Sajkunovic advises. “When buying a property, ask the real estate agent whether they think the property is rentable and, if so, how much it could rent for.”
Finally, ensure you get a vendor’s statement – a pre-contract disclosure of all relevant information – so you are aware of the dimensions of the block, the zoning, any statutory warnings from the vendor and things you may not think about, like whether the property is in a bushfire-prone area. Depending on where you live, the vendor’s statement may be known by a different name – for example, it’s known as a section 32 in Victoria – but the actual document will be more or less the same.
5. Get a building inspection
Ms Sajkunovic advises you to organise a professional building inspection during the cooling-off period after making an offer (unless you buy at auction, where there is no cooling-off period). Prior to making an offer, have a friend or family member with some building knowledge go through the property and check for any obvious flaws.
Geoff Sharp, Principal Building Consultant at House Inspections Melbourne, says that a building inspector is likely to pick up on a number of things an untrained eye will miss, including illegal works, structural defects, termite attacks and dodgy cover-up jobs that have failed to repair existing problems.
“Your new home is a life investment and should be an exciting experience,” he says. “Don’t make it your worst nightmare.”
6. Make an offer or go to the auction
If making an offer, avoid the temptation to start too low, as the vendor may not take you seriously. An initial offer of around 15 per cent below the asking price is a good starting point. Prior to talking numbers, ask if you’re the first person to make an offer and, if there have been others, ask why they were rejected. This will give you an idea of what the vendor wants.
If you go to the auction, be prepared. They can be a nerve-wracking experience, so knowing what to expect will be a huge advantage. Ensure you take a personal cheque book along – if you’re the winner, you’ll be expected to pay the deposit immediately.
Set a maximum “walk away” price and stick to it; don’t be afraid to bow out if the numbers start getting too high. If you find the whole process daunting, take along a friend or family member with prior experience who can advise you.
7. Sort out the conveyancing
Get a conveyancer to look over the contract before you sign it. They will confirm that the vendor actually has the right to sell the property and there is nothing to impede on the mortgage or re-sale.
Exchange the contracts, money, and the keys to the property and start enjoying your new home!
The people you need to know
Lender: The bank or other institution who provides you with the means to purchase your house and who you will be paying your mortgage to.
Real estate agent: The person facilitating the entire sale. They work for the vendor.
Building inspector: A person who knows what to look for and can tell the difference between a great investment and a house that’s going to bring you nothing but pain and suffering.
Conveyancer: The legal representative who will organise contracts and negotiate conditions of sale.
Vendor: The person selling the house you want to buy. They want the best price possible.
Mortgage broker: Individuals who use their specialist knowledge to help you find the right home loan.