Buying your first home - Australia
The first step into the property market can be daunting. However, there are a number of steps to take which will uncomplicate the process and ensure you have the right information to make an informed decision. After all, whichever way you look at it this is a major purchase.
The first step is to decide on the style of home you want, taking into consideration your lifestyle, any foreseeable anticipated changes in life, such as starting a family, and what you like in housing. Begin by making a realistic list of your dream property and then sort it into 'must have' and 'nice but optional'. If you have a partner or children making the move with you, be sure to seek their input as they may well have something constructive to add.
Then consider various locations taking into account travel routes for work, school and regular recreation. Do a little research by taking a drive around the suburbs you have pinpointed and check the style of housing available and if it is likely to meet your wish list. Enquire about neighbouring suburbs as prices many be a little lower for an extra drive each day. Consider the possibilities of extending your search if the home you can afford and want is located further away from work.
The next step is to consider your budget and many financial institutions offer simple worksheets that can help you calculate repayments as well as the amount you can afford to borrow. A lending institution will apply a qualifying ratio, the percentage of a home buyer's gross income that can prudently be allotted for debt, based on your income or incomes.The most commonly used rule of thumb is 28 per cent or 36 per cent, which limits the sum of monthly mortgage principle, interest, tax and insurance payments to 28 per cent of the home owner's gross monthly income and further limits the total of all long-term debt payments to 36 per cent.
There is also a first home owners grant available from the government, upon meeting a certain criteria you may be able to recieve a grant from the government to assist with your first purchase. For more info see First Home Owners Scheme >>
Many lending institutions also offer a pre purchase loan approval service which will give you a fixed amount for your budget. The difference between being preapproved or pre-qualified is that under preapproved your loan is ready to go subject to an appraisal and possibly an inspection of the home you decide to buy. Pre-qualified means you are still subject to the mortgage lender's approval of a completed application, satisfactory credit check, home appraisal and home inspection.
When you find the property you want, the real estate salesperson will guide you through the process of submitting a contract. Usually they will require a 10 per cent deposit with the contract.
There are two ways to buying a home, at auction or through private sale direct from either the owner or through the owner's agent. Offers to purchase may be made in two ways, either conditional or unconditional. An unconditional offer means you are committed to buying the property as listed, with or without drapes or fixtures, at the price agreed without any other conditions. A conditional offer means you will buy the property only if certain conditions, which must be listed on the contract or offer to purchase, are met. Common conditions include subject to finance, or a satisfactory pest and building inspection. If these conditions are not met within the specified time period, the offer becomes void. Be wary of not nominating a specific lender as your source of finance. You may be forced to accept finance at higher rates from a lender you would not normally consider in order to fulfill your contractual obligations.
If you are buying at auction, you need to have your finance pre-approved and have your solicitor check the terms and conditions of the contract of sale of real estate who will inform you of any disclosures you need to ascertain from the vendor via the real estate agent before the auction day. If you are successful at the auction you are committed to buy and the contract is unconditional. The settlement date is nominated in the contract and depends on the terms of the sale.
Most properties settle after 30 days. On this date, the remaining purchase price is paid and you receive the keys to your new home.