What Are The Steps To Buying A Home?
Purchasing property can be both exciting and a bit daunting. Being prepared so you are ready to make an offer when you find the right property will make the process a whole lot more enjoyable. Whether you are a first home buyer or an experienced investor, there are five important steps to buying a home.
5 Steps To Buying A Home
1. Work out your budget
2. Save your deposit
3. Find the right home loan
4. Find the right property
5. Have the right people on your side
Step 1 Work Out Your Budget
If you have already started saving your home deposit you no doubt understand what it feels like to live on a tight budget. A home loan is a commitment for a long time, so it’s important you will be able to afford the repayments without being stressed.
When you speak to a mortgage broker to make an initial enquiry they can help you work out your income, expenses and what you can afford to pay in monthly home loan repayments. This is also known as a serviceability calculation, and is one of the factors which determines the maximum home loan amount and purchase price you can afford.
Online calculators are great as a guide, but they can't take into account your individual circumstances. So if you'd like a better picture of how much you can afford to borrow and how much deposit you need, contact us for an obligation free chat.
How Much Can I Borrow To Buy A House?
Contact us to find out how much you can afford to borrow and what deposit you need. Cash Back Mortgage Brokers are happy to chat to you whether you are ready to go now or just doing your first bit of research.
Step 2 Save Your Deposit
If you already own another property you can skip the difficult step of saving a deposit, provided you have enough equity in your existing property. Read more about Using Your Home Equity.
If this is your first home the amount you can borrow and therefore the maximum price you can pay for a home is dependant on two things; the repayments you can afford, and how much deposit you have saved.
The minimum deposit you can contribute to a property purchase is 5% of the purchase price plus costs. Costs include transfer duty, your pest and building inspection fee and legal fees. A rough guide to how much these will cost is below.
How Much Is Stamp Duty
Stamp Duty is also known as Transfer Duty or Conveyance Duty depending on which state or territory you live in. It is payable on purchases of property in all Australian states and territories, there's no escaping it - unless you are a First Home Buyer. If you are a First Home Buyer you may be eligible for a First Home Owners Grant if you build a new home. First Home Buyers also receive waived or reduced stamp duty. Click Here to read more about the First Home Buyer Grant & Benefits available in each state and territory.
If you aren't a first home buyer, the amount of stamp duty payable on a property purchase can be worked out using the following calculators on your states revenue office website:
How Much Are Legal Fees?
Before you commit to using a conveyancer or solicitor be sure to ask how much they charge for the conveyancing of a property purchase. As a rough guide you can expect to pay around $2,000 for the conveyancing of a basic straight forward property purchase.
How Much Is A Pest And Building Inspection Report?
It's becoming more common for vendors to include a pest and building report with the contract for properties going to auction, so that multiple prospective purchasers don't need to arrange them. There is a push for this to become required by law, but at the moment it is at the discretion of the vendor. So it's a good idea to ask the real estate agent if a pest and building report is available. If you order one yourself you can expect to pay around $500 to $1,000. Your conveyancer or solicitor will deal with them regularly and can recommend one who is reliable.
Are There Any Other Costs?
Yes there are other smaller fees you will have to pay when buying a property. These include Land Title Fees; For example the Registration of Transfer Fee which is currently $138.80 in NSW and Registration of Mortgage Fee, also currently $138.80 in NSW. Depending on the deal you or your broker has negotiated you may have a home loan package fee or establishment fee to pay. This amount varies between lenders and loan products. These fees may be waived, it pays to ask the question of your lender or broker.
I Want To Buy A House But Have No Deposit
If you are struggling to save there is one alternative to saving a deposit, a guarantor. Having someone go guarantor for you means they offer one of their assets as security for your loan. The security they offer could be a property they own, or money they have in a term deposit. There are risks for the guarantor and they must obtain independant legal advice before proceeding. Want to know more about having someone such as a parent as a guarantor? Contact us or check out our First Home Buyer Information.
Step 3 Find The Right Home Loan
As tedious as it may seem, having your home loan lined up before you get serious about a house can save you a lot of heartache. A mortgage broker can help you arrange a pre-approved home loan before you have found the property you want. That way when you find a property you love, the one that feels like home, you’ll be ready to make an offer to buy it.
Pre-approved home loans, also known as Approval in Principle, are easy to apply for as you usually only need to supply basic documentation. The lender will review your proposed scenario and indicate whether they will lend you the money you require. If you would like to discuss your scenario or apply for a pre-approved loan contact us today.
Australia has one of the highest rates of home ownership in the world, so our home finance market is big business. There are countless home loan brokers, lenders and loans out there all wanting you to choose them. So why chose our brokers? A Cash Back Mortgage Broker can offer you the same lenders, loans and rates as any other good home loan broker. The difference is, a Cash Back Mortgage Broker will also refund you monthly trailing commission of up to 0.3%p.a. each month. On a $500,000 home loan balance this means you can receive a commission refund of around $50 to $100 per month, depending on the lender you select. Get in touch with a Cash Back Mortgage Broker to find out more about how much your commission refund could be.
Get Your Monthly Commission Refund
Get in touch with a Cash Back Mortgage Broker to find out how much your monthly home loan commission refund could be.
Step 4 Find The Right Property
Now for the fun part, finding your home! With a pre-approved home loan you have the certainty of knowing the maximum purchase price you can go up to, and be able to confidently inspect properties and make offers. Saving a deposit can take a long time, so no doubt you’ve had a lot of time to work out exactly what you would like in a property.
Your maximum purchase price may not be enough to get you everything you want in a home, so you may have to make some compromises. If you are having trouble finding the right property it might be a good idea to make a list of needs and wants, and compare it to the houses you inspect. Consider what features can be changed over time as money permits, such as updating an outdated kitchen and bathroom. Weigh these things up against the features you can’t change, such as the location and proximity to schools, shops and transport. Ask yourself what is more important to you now and for the years you plan to own the home.
Step 5 Have The Right People On Your Side
The right help during your property purchase will not only make the process a lot easier, but may also save you many thousands of dollars. There are risks when you buy property that you need professionals to help you look out for, such as issues with strata or termite infestations. It is a good idea as a minimum to use the following professionals for your property purchase;
- a conveyancer or solicitor to carry out searches and handle the property transfer
- a mortgage broker to help you get the best home loan interest rate
- a building and pest inspector to check the property over for damage
Last, but most important of all is to have someone level headed to talk to for a sanity check during the process. Buying property is an emotional business. Falling in love with a place then going crazy and bidding over your limit at auction or offering more than you should isn’t uncommon. So enlist someone you trust to hold your arm down at auction if needed, and console you or celebrate with you afterwards.
Buying a property may seem daunting, but as long as you are prepared and follow these steps to buying your first home it will be much easier than you may expect.