Your first home can be one of the biggest purchases you will ever make, so you want to ensure you get it right. Taking the initial steps towards buying your first home can be both an exciting and stressful time. There are many things to take into consideration, whether you are building your home from scratch or purchasing an established property. Proper research, successful budgeting and awareness of all those hidden extra costs are key to removing stress from the equation and progressing with the successful purchase of your very first home.
From investing in the right area to financing this big step. Here’s a compiled systematic guide to purchasing your first home to help you get it right.
RESEARCH
The initial step to buying your first home is to view a variety of properties to get a feel for the market. The internet is a powerful tool to have at your disposal, so research the suburb and area, as well as the house itself where possible. Some online site contents allows you to see for yourself which areas have increasing and decreasing populations. Consider high land value, increasing population and local amenities such as schools, public transport, shops, hospitals, leisure centres, parks and wildlife reserves. Also, some sites online filter properties according to how close or far you wish to be from certain amenities.
It is also really important to do your own personal research and planning before purchasing your first home. Always look at what you need in the immediate future rather than in the long term.
Instead of going out and planning eight to 10 years ahead for a large house with three to four bedrooms, and putting undue financial stress on yourself by spending more than you need to spend now, you may be better off getting a one- or two-bedroom apartment in an inner-city suburb in an older block. If you are lucky, it may be renovated or partially renovated and the block well maintained. In doing this, you will be spending up to $80,000 less and so be able to really attack your debt in the first three to five years. By then you will have set yourself up with a capital base for that bigger place that you really do need further on down the track.
BUDGETING
The initial deposit tends to be the largest expense when buying a first home. When it comes to budgeting, you will have your own cost of living to cover, so sometimes it is very hard to put together that initial deposit.
If you are buying a house for $400,000, you need to show that you have $20,000 genuinely accumulated in a savings account for a minimum of three months. In addition to this you must also make sure that you have the relevant funds to complete your purchase, so on top of that $20,000 deposit, for a house of $400,000, you will need another $17,000 or $18,000 to cover stamp duty and the cost of legal fees and adjustments before you are eligible for any grants.
Sit down and plan how you are going to achieve your goals by assessing your income and highlighting where you are going to make sacrifices each month. Perhaps not taking any holidays, or perhaps just sacrificing some of the things you normally take granted for.
There are many options available for those who may be struggling, such as first-home buyer loans, low-deposit loans, and even guarantor loans where you would use someone else’s equity, usually your parents’, to lower your deposit amount. Some banks offer a 6-months pre-approval for home buyers, allowing you to know how much you are eligible to borrow before even looking for a house. This can be beneficial as it will put things into perspective and allow you to venture into the market with clear expectations.
OTHER COSTS
Several costs accompany the purchase of your first home in addition to your deposit, stamp duty and future loan repayments. These are things that new home buyers often forget to budget for, and as such may be caught off guard with the added expenses.
Registration fees will need to be paid. If you are buying a new home, be aware that GST may apply. GST will also apply to your valuation, inspections, and real estate agent’s and auctioneer’s fees. A lender’s mortgage insurance, or low-deposit premium, is a one-off charge added to your loan amount that will allow you to purchase a property with a smaller deposit in the future.
Finally, if you are looking to purchase an investment property, remember to consider the implications of the capital gains tax if you ever decide to sell. Ensure to consult with your tax advisor on this when heading into investing.
THE PROCESS
Following your research of the market and area, your budget projections and your research of all the extra costs in purchasing your first home comes the administration process.
The first step is usually an application interview. You will apply for the home loan that you have deemed right for you, in which the decision on your acceptance is usually relayed in about 24 hours. The lender will use this time to check things such as property valuations and whether or not you will need building and contents insurance. From here, if accepted, you will receive a loan contract with terms and conditions. Once it’s signed and returned, your lender will now be responsible for your documents.
With a secured loan, you can now move on to the exciting part, buying a house. If you purchased your new home at auction, you will need to exchange contracts and usually pay a 10 per cent deposit on the spot. If not, you can usually pay a holding deposit of one per cent at the time of purchase, and then 10 per cent when you exchange contracts. Remember that a “cooling off” period may apply after the exchange of contracts should anything go wrong.
The final step is the settlement, in which your lender will confirm the loan details and settlement completion. You are charged the stamp duty and registration costs at this point. Once you have registered your deed and mortgage with the Land Title Office, you will receive the keys to your first home and your new life can begin.