So you’ve decided that you’re tired of living in a rental property or with mum and dad. You now want to become one of the millions of Australians who own their own home.
What do you do to make that happen? Here are 12 basic steps you need to get into your own home.
1. Check your financial position.
First, you need to understand your current financial position. How much deposit have you saved?
Work out your income and expenses to determine what you can afford to repay on a home loan each month. (A quick tip – don’t include your current rent in your expenses as this outlay will disappear when you buy a home.)
And before you approach the bank check your credit history to make sure you have no black marks against your name.
2. Reduce any existing debts.
Resist the urge to overspend while you’re saving. To increase your borrowing capacity use some of your savings to pay down your consumer and personal debts; things like credit cards, store cards and other loans.
If like many Australians, you’ve got multiple credit cards, cancel a few. This will increase the amount the banks will lend to you because even if you don’t spend the limit available on your cards, the banks assume you could.
3. Ask an expert.
Consult a finance broker to work out what you can afford, what type of finance packages are available to you, what you’ll need to qualify for a home loan and how much you’ll require for a deposit.
It’s good to get a pre-approved for a loan before you start house hunting, so you know exactly how much you have to spend. This means the bank agrees to approve a loan up to a particular amount subject to a few conditions including valuing the property you plan to purchase.
4. Hidden costs.
Don’t forget the hidden expenses of buying and owning your own home.
Allow at least an additional five per cent above the cost of your property to cover purchasing costs such as building and pest inspections, conveyancing fees, stamp duty and a little more for buyer’s agency fees if you’re using one.
By the way, having a buyer’s agent to level the playing field for you makes a lot of sense. After all, the vendor has an agent on his side working for him.
5. Reality check.
If you’re having difficulty getting lenders to give you a loan for the type of house you want, you’ll have to budget and continue saving for a bigger deposit. Or you’ll have to be more realistic with your expectations.
Remember, your first home won’t be your last home so be realistic. Don’t expect to start out in the type of property it took your parents 30 or 40 years to achieve.
6. Clear criteria.
Next, narrow down your criteria for the type of home you're looking for.
Decide on your priorities now and in the future. What will your home look like? What sort of area would you like to live in? What type of schools, public transport and shops will you find in your neighbourhood?
7. Start looking for your dream home.
Start with the online portals such as homely and doing a bit of research to see what’s available – determine how much house your money can buy in the suburbs of your choice.
Educate yourself so you thoroughly understand your financial options. Your house is not only your home but an investment, so you will have to learn a bit about the property market and finance.
9. Take a look.
Attend open for inspections and auctions to get a feel for the real estate market you’re interested in and learn what you can expect in terms of competition and what you'll get for your money.
Get used to talking to real estate agents so they don’t intimidate you. Or you could engage a proficient buyer’s agent to do this for you.
10. Dot the i's & cross the t's.
When you find a home you love – do your due diligence. Get a solicitor to check the contract, a property survey, and a building and pest inspection report completed to look for damage or any structural faults that'd affect the home's value.
11. Make an offer.
Once you feel confident you know your local market start making offers on the homes you want and eventually one will be accepted.
Don’t be afraid to negotiate on price, particularly today where the market has turned in favour of the buyer. The odds are the vendor will be flexible because they want to sell their property just as much as you want to buy it.
And don’t be surprised if you feel a little buyer’s remorse a few days after the deal is done – that’s normal after any big financial commitment.
You’ll soon be the proud owner of your own home and have a foot on the ladder of the property market. Now, all there's left to do is book the movers and plan the housewarming party.
Michael Yardney is a director of Metropole Property Strategists, who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia's leading experts in wealth creation through property and writes the Property Update blog.
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