Steps to Buying a House

Buying a house in Australia can be an overwhelming experience, especially for first-time home buyers. Fortunately, there are many resources available to guide you through the process. Here are the 10 steps to buying a house in Australia in 2024:

Work out your budget: Before you start searching for a home, it's essential to work out how much you can afford to spend. Consider all your income sources, expenses, and debts to determine a realistic budget.
Choose the suburb and type of property: Determine the location and property type that suits your needs, lifestyle, and budget. Consider factors such as proximity to public transport, schools, shopping centers, and other amenities.
Get pre-approval for a loan: Speak to a lender and get pre-approved for a home loan to know your borrowing capacity and budget. Pre-approval is essential to know how much you can afford and gives you an advantage when negotiating with sellers.
Make a shortlist of properties you like: Use online platforms or engage a real estate agent to shortlist properties that match your criteria. Research the market trends, including median prices and recent sales in the area.
Inspect the property: Schedule a physical inspection of the property to check for faults or issues that may affect your decision. It's essential to inspect the property with someone who thinks differently than you to get a better insight into areas that your eyes might miss.
Engage a conveyancer: A conveyancer will help you with the legal and administrative tasks involved in transferring ownership of the property. They will also help you check the title and perform the necessary due diligence to ensure that the property is free from any encumbrances or legal issues.
Get to know the sales process: The sales process can vary depending on the state or territory, but it generally involves making an offer, negotiating, and signing a contract of sale. It's essential to understand the sales process to make informed decisions and avoid costly mistakes.
Set aside time to do the paperwork: Once you've found a property you like, you'll need to prepare and sign legal documents, such as the contract of sale, mortgage documents, and insurance policies. It's essential to set aside enough time to complete the paperwork and seek legal advice if necessary.
Organize the necessary inspections: Before settlement, you'll need to organize building and pest inspections to ensure that the property is in good condition and free from any infestations. These inspections are usually done at the buyer's expense.
Settlement: Once all the conditions are met, and the necessary paperwork is signed, settlement can occur. The balance of the purchase price is paid, and the property's ownership is transferred to the buyer. It's essential to ensure that all the legal and financial requirements are met before settlement.

Buying your first home is a significant milestone, and it’s important to approach it with careful planning and informed decisions. Here are some essential tips to help first home buyers in Australia navigate this exciting journey:

1. Budgeting Wisely: The foundation of buying a home starts with a solid budget. Determine how much you can afford by assessing your income, expenses, and savings. Factor in additional costs such as stamp duty, legal fees, moving expenses, and ongoing maintenance. Consider setting aside an emergency fund to cover unexpected costs that may arise after purchasing your home.

2. Understanding the Market: Familiarize yourself with the property market in your desired location. Research recent sales, market trends, and property values to get a realistic idea of what you can afford. Attend open houses and auctions to gain insights into the buying process and the competitive nature of the market. Engaging with local real estate agents can also provide valuable information about upcoming listings and neighborhood dynamics.

3. Securing a Mortgage: Obtaining the right mortgage is crucial. Start by getting pre-approval from a lender to understand how much you can borrow. This not only gives you a clear budget but also shows sellers that you are a serious buyer. Compare different mortgage products, interest rates, and fees from various lenders. Consulting with a mortgage broker can be beneficial as they have access to a wide range of loan options and can help you find the best deal.

4. Importance of Inspections: Never skip property inspections. Hire a professional building and pest inspector to thoroughly examine the property before finalizing the purchase. Inspections can reveal hidden issues such as structural damage, pest infestations, or necessary repairs, which can influence your decision or negotiation power. Knowing the property's condition can save you from costly surprises down the line.

By budgeting wisely, understanding the market, securing the right mortgage, and valuing property inspections, first home buyers in Australia can make informed and confident decisions. These tips will help ensure the journey to homeownership is smooth and successful

Are you ready?

The saying goes, “look before you leap”, and it couldn’t be more true than when considering purchasing a property. Before you leap into finding your dream home, take a breath and ask yourself the big question - “am I ready?”. If you’re still experiencing itchy feet and wanderlust then possibly you’re not quite ready for the commitment at this time in your life.

Evaluate your finances and budget

You’re probably wondering how much you can borrow from the bank. Good question! The answer is determined by a multitude of factors. A mortgage is a massive financial responsibility and to get a good idea of where you stand it’s best to have an honest conversation with your accountant to figure out what you can afford. Knowing this will help when you start searching for a property. Apply for a copy of your credit file and make sure you clear away debts. If you have bad credit, it might not be the best time for you to purchase a home or investment property. If you have multiple credit cards and loans to pay off, minimize these as much as possible. Reducing your limit on your cards will help you secure a larger finance amount. If you’re struggling to meet credit payments, reach out to your provider to help you renegotiate the terms of your payment schedule.

The cost of buying a house

It pays to seek advice from a financial advisor, accountant or lender to truly get the scope of the full costs associated with buying a home. Here is a list of costs you will likely incur:

Deposit. You need to come up with a 10-20% deposit to secure a home loan. To avoid paying Lender’s Mortgage Insurance (LMI), approximately 20% is required. Low deposit home loans do exist, but your mortgage insurance will be much higher and there can be a few more hoops to jump through.
Stamp duty. The amount of stamp duty tax you pay depends on the state you live in and is applied on the purchase value of a property. You can use a Stamp Duty calculator for a specific quote.
Legal and conveyancing fees. Depending on the amount of legal work required for conveyancing and other legal checks, you should put aside $1000-$3000.
Finance and insurance costs. If you’re borrowing more than 80% of the purchase price, than you will have to pay LMI to protect the lender if you fail to make your repayments. There can also be fees for valuations, applications and settlements. A mortgage application can cost $200-$600 depending on the lender, and a valuation could set you back about $400-$500 if the bank doesn’t waive the fee.
Building and pest inspections. Make sure you have a solid home or investment property by ensuring you complete a building and pest inspection. This should not be overlooked as it could cost you far more in the long run going without. Inspections average $500-$700 for peace of mind that the property is structurally sound and pest free.

Investigating mortgages and interest rates

Bonus points if you have your deposit ready, but you still need to shop around to find the right financing for you. Be careful to make sure you understand all the terms of the agreement. Find out about the:

Interest rate
Term of the loan (usually 25-30 years)
Whether you can redraw funds
Can you make additional repayments and are there conditions attached?

How often is the interest calculated?

If you don’t have a deposit saved, full finance of the purchase price may be an option by using your renting history as proof of savings or by having a parent go guarantor, but without equity, there are more risks associated and you will be required to have full insurance.

Getting home loan pre-approval

Otherwise known as conditional approval or approval in principle, securing pre-approval before even searching for your home is ideal so you can know your price range. By providing your bank or lender with your financial details - such as your credit report, savings, income and investments - they will be able to review the information and grant you with pre-approval to borrow up to a certain amount. Now you’re ready to go shopping!

Choosing the suburb and type of property

When riding the emotional rollercoaster of buying a home, it’s important to have a clear sense of what you are looking for. The list of priorities will vary for investors, singles and those looking to purchase a family home. Consider making a checklist of all your non-negotiable, “must-have” requirements. Here is a list for wannabe homeowners to work from:

Location - close to work, schools, family and friends
Access to public transport, services and shops
Is there established infrastructure or plans to develop the area?
Suburb character - is there a good vibe and friendly community?

To find out where you can afford to buy, you can research property prices, and there is plenty of existing property market data to help you quickly find the median price of an area you are interested in.

Figuring out what type of property is right for you:
House, unit, studio, townhouse, acreage?
Do you have a style preference? Victorian, Art Deco, modern or a renovator’s dream?
The practicalities - how many bedrooms, bathrooms, and parking spots?

Do I need a real estate agent or buyer’s agent?

Reach out to local real estate agents for information about what’s for sale, tips for buying a house in the area, what the area is like, and how the property market is performing, along with any other general queries. Appointing a buyer’s agent is handy if you are looking to buy at auction, but they can also work to find suitable properties for you, negotiate with the seller, and complete background checks on the property - eliminating some of the stress in a stressful time!

Property inspections

As soon as you enter the home you are considering buying, you will get an immediate emotional response - negative or positive. While it’s easy to walk away when you get a negative vibe off property, it’s much harder to do when the feeling is positive. A positive emotional response is very guiding, but don’t get too invested before making important structural checks, investigating the utilities, and sussing out the new neighborhood!

Things to watch for:

Mould! Check for damp or mold spots on the ceilings, walls, and skirting. Pay careful attention to areas with fresh paint touch-ups.
Sagging ceilings or buckling walls.
Do the doors and windows fit right and open and close smoothly?
Test the taps for flow and even temperatures, and flush the toilets.
Check under carpets to see the condition of the floors.
Take a look under all sinks to ensure the plumbing looks good.
Check the hot water system.
Lights and fuse box.
Roof, guttering, and drains.
Exterior walls - check for cracks.
Inspect the neighborhood and get a feel for whether it suits your lifestyle and requirements.

If you are sure you want to go ahead with purchasing the property, get a qualified building inspector to make an assessment. They will look for structural defects, pest infestations, faulty wiring, plumbing and drain issues, asbestos, lead paint, and more.

Preparing for purchase

A licensed conveyancer can request inspections for you while also managing the exchange of contracts and other legal searches. Once you have found the property you want to purchase, get a property valuation to help you figure out the right price to offer. Finally, you are ready to make an offer! Don’t low-ball here less than 10% of the asking price, otherwise you may miss out when higher offers stream in. When you’ve decided on a figure, reach out to the agent and let them know how much you’re willing to pay and your deposit amount. Next, simply exchange contracts and pay the deposit. Both you and the seller are not legally bound to the sale until the contract of sale has been signed and swapped. Included in the contract of sale is the:

Names of parties
Property address
Purchase price
Terms and conditions
Special inclusions in the sale
Date of settlement

If you’ve bought through private treaty you will have a cooling off period. This is not available when sale is made by auction. During this period you can cancel the sale if you change your mind, but you may be required to pay a penalty. The cooling off period varies by state. In the time between exchange and settlement - generally six weeks - you should be busy arranging the balance of the selling price by finalising the finance and signing the mortgage. You will also want to insure your property, and you will be required to take out building insurance. Once the balance of the purchase price and Stamp Duty is paid, the settlement of the property has been made and you will receive your keys and title deeds. Essentially, the lender will transfer your money to the seller and the property is ready for you to occupy!

Moving into your new home

You are almost ready to move into your home! Now you will need to sort out utility accounts, pack your belongings, and employ the help of a removalist and possibly a cleaner! Don’t forget to transfer the address on all your accounts and organise for mail redirection.

First home buyers grant

Are you eligible for the first home buyers grant? If you and your partner haven’t ever bought a property before, there’s a good chance you are eligible to receive the First Home Owner Grant (FHOG). FHOG is a national scheme, but each state funds its own and the amount varies state-to-state. The government will determine whether you can receive the grant based on whether you have purchased a home or investment property previously, or whether your spouse or partner has too. It’s not necessary to apply in advance, but you need to submit your application within 12 months of purchasing your new home.

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10 steps to buying a house in Australia 2024