Buy a home in 10 simple steps
You have been told that property is a great investment and that you should get a foot in the property market as soon as possible. You want to sign on the dotted line but you have no idea of how to go about finding and buying your first home. This is every home buyer's A-Z guide.
It's important to realise that there's a lot of legwork that you need to do before you make an offer. So, if you're thinking about buying a home, here's what you should do before you start the big hunt.
1. Save up for a deposit
The single most important thing that you can do to improve your chances of getting home loan approval from a bank is saving up for a deposit. It shows the bank that you are serious and financially responsible and it lessens their risk in lending you the money. And it's good practice for you to get into the habit of paying back a monthly bond instalment. Aim for 10% of your estimated purchase price, but every little bit helps.
2. Work out what you can afford
Use an affordability calculator like the one found here to work out how much you're able to spend each month on bond repayments. The calculator asks for your income and expenses and calculates how much you can spend on your new home. Note that your monthly repayments cannot be greater than 30% of your gross monthly income.
3. Get pre-approval
Some banks and most bond originators (who submit your bond application to all the banks on your behalf) will issue you a pre-approval certificate. This certificate states what you can afford and confirms that you have a clear credit record. It's not an absolute guarantee that you'll get the bond you apply for, but it gives you, the estate agent and the seller, a good idea that you will
4. Identify the area in which you want to buy
This is often a stumbling block for first-time home buyers because you quickly realise that you can't really afford to buy in the area of your dreams. Don't give up hope you simply have to lower your expectations of a three bedroom, free-standing starter home, or work out the nearest affordable suburb. Also think about things like your route to work, how close you'll be to friends and family and what schools are in the area.
5. Prepare the paperwork
Until you've applied for a home loan, you have no idea how much paperwork is involved. When you find the home of your dreams, you'll want to act quickly, so be sure that you have copies of the following documents available:
- A copy of your ID document
- A salary slip less than two months old (or a letter from your accountant if you're self-employed)
- Six months' worth of bank statements
- You will also need to list your assets and liabilities, so be sure that you know the value of all your lines of credit, policies, investments and valuable possessions.
6. Start searching
The Saturday newspapers have a property section and you can search by area on various property sites online. It's also a good idea to sign up with local estate agents, because they might have something on their books that they're not actively marketing but that's just right for you. Don't househunt with a sense of urgency, but slowly educate yourself about what you can afford in your area.
7. Make an offer
When you find the house that you think might just be the one, get ready to make an offer. Remember that estate agents are sales people and will put pressure on you for a higher offer. But you also shouldn't make an extremely low offer on principle if you want the property. You're entitled to call in a builder or other specialist if you're worried about any aspect of the structure. There will often be a bit of negotiating between you and the seller at this stage.
8. Apply for a home loan
When you get the exciting news that your offer has been accepted, you'll have to apply for a home loan. It's a good idea to use a bond originator to apply to more than one bank at a time with only one set of paperwork. This ensures that you get the best chances of approval and the lowest possible interest rate. This is where all that paperwork you prepared earlier will come in handy.
9. Hurry up and wait
You should hear back about your home loan approval fairly quickly, but it can then take ages for the transfer (when the property is actually put into your name) to go through. Use this time wisely buy things that you need, save up for any hidden expenses and start to plan your life in your new home.
10. Move in
Collect your keys and move in. Congratulations on making the biggest investment of your life!