Posted on 17 April 2019
Buying a home starts before making an offer or signing a contract. There are many different things to consider:
- What you should look for in a property
- Are there any grants you may be able to apply for?
- Which lender and home loan should you apply for?
Here is a little information to help you through the process.
- Current Government Incentives
There are a range of ways to receive assistance in achieving your home loan goal.
a. In NSW there is the First Home Owners Grant (New Home) (FHOG) scheme. This is designed to assist eligible first homeowners to purchase their first new home with a $10,000 grant. The grant is available to buyers of new properties worth up to $600,000, while stamp duty is waived for all new and existing homes valued up to $650,000 and with stamp duty on properties above $650,000 reduced on a sliding scale. If you are already in a position to purchase your first home, make sure you give your solicitor your completed First Home Buyers Assistance Scheme form so as to not miss out.
b. The First Home Buyer Super Saver Scheme (FHBSSS) is another government incentive that allows first home buyers access to release funds from their Super account in order to purchase their first home. An amount up to $30,000 can be released under the scheme. To be eligible you must be over 18 and intend to purchase a home within 12 months of having the funds released. You need to intend to reside in the property for at least 6 months.
- What are you looking for?
Before starting to look, you should really consider the kind of lifestyle you want to have while living in the property. It is important to set aside some time to make a list of all the features you want in your home. Be as specific as you can.
The type of home you are looking for will likely be different considering your situation, are you single or married, kids or no kids, how big a family are you planning on having, is this a short-term home or long-term? Are you looking for a house or an apartment? Do you want to be near public transport, in a good school catchment?
- What can you afford?
You need to meet with either your bank or a mortgage broker to determine how much you are able to borrow based on your annual income, expenses and your deposit amount.
As a minimum you should have saved a 10% deposit for the purchase but 20% is better. The reason why is with a 20% deposit the bank will not require you take out Lenders Mortgage Insurance, which can save you thousands of dollars.
You then also need to consider what features you want in a home loan. Do you want the capacity to make extra repayments, do you wan an offset account, do you want to pay principal and interest or interest only repayments? There are many things to consider and a good broker can take you through this process.
Most lenders these days require you to provide a breakdown of your expenses. So in the lead up to applying for your loan, best over say a 3 month period you should look at collating your expenses and earnings and putting them together in a budget. Please note these days you can’t just put in a random figure (especially one that understates your expenses) because the broker and the loan assessor will request copies of bank account and credit card statements and will go through them and cross reference with your budget.
Be sure to get your pre-approval in place before starting to look at properties and NEVER make an offer on a property without having a pre-approval in place.
- Now to find the property
First thing is to do some research online, Realestate.com.au and Domain.com.au both give you an opportunity to see what properties are available in the areas you are interested. You can use filters and narrow your search to try and shortlist properties that meet your criteria.
Now you can hit the pavement.
Remember to keep checking back to your list of desirable features for the home you want, don’t get carried away in the moment. You don’t have to find your home on the first day.
Once you have found one you like, ask the agent for a copy of the contract. Engage the services of a conveyancer and have them look at the contract before you make an offer. Once they confirm all looks good then it is time to make the offer. Be careful to not go in to high, but not so low that the agent just rules you out as someone who has no idea.
Be prepared to negotiate it is rare the seller (vendor) will accept the first offer you make. Do not make the offer unless you have your 0.25% deposit ready.
The contract would have stipulated whether it was to be a 5 or 10 day cooling off period. This is your chance (with the help of your conveyancer) to get any checks done ie Pest, Building, Strata reports etc. You will need to have the remainder of the 10% deposit available on the day of exchange. If you have a 10-day cooling off period then you will have a further 4 weeks before settlement date, unless otherwise agreed at the time of exchange.
Once you exchanged it is simply time to wait until settlement. This gives you a chance to organise time off for the move, a removalist, connection of facilities such as gas, electricity and phone.
- Know what you are entitled to
- Know what you want
- Make sure you have a pre-approval before you start looking
- Engage the services of a good conveyancer.