What is the process of buying a house?
Buying a house can be a time consuming process so we’re here to help make it a little easier. This step-by-step guide to the property buying process will make things easier for you.
Buying your first house can be daunting, especially when you’re unsure how the whole process works. To help you out, we’ve prepared this quick step-by-step guide. Here’s how to purchase a home in Australia:
Step 1: Figure out your budget
Understand your financial capabilities and know how much you can afford. Buying a home out of your financial means will only make things difficult in the long run when you have to repay your loan.
- A few factors to consider when you’re setting a budget are:
- Are you buying alone or with someone else?
- How much have you saved for a deposit?
What does your income and expenses look like?
In addition to the home’s purchase price, always include costs such as stamp duty, lender’s mortgage insurance, property valuation, conveyancing, and loan fees in your budget. These additional expenses could easily set your budget off track.
Review your finances carefully to figure out what a suitable budget looks like for you. You can use a borrowing power calculator to help you get an idea of what price range you should aim for when applying for a home loan. Knowing what you can afford will help you narrow your search and avoid wasting time on properties that are out of your price range.
How much deposit do you need to buy a house?
Ideally, you want to put down a deposit of 20% of the home’s value or more. If your deposit is less than that, you will need to pay for Lenders Mortgage Insurance (LMI) which is a one-off cost on top of your home loan. Having a deposit of over 20% will also save more over the life of the loan.
Step 2: Find a good home loan deal
Once you have an idea of how much you can borrow, it’s time to compare home loans. Aside from the advertised interest rate, keep an eye out for the comparison rate, any ongoing fees, and useful loan features. Beware of loans that boast extremely low rates as they could make up for it by charging you huge fees.
When looking for a home loan, it’s important to find one that suits your needs best. Various loan types cater to different borrowers. A fixed rate, variable rate, and split rate home loan offer their own set of advantages and disadvantages. Understanding what you want out of your loan will make choosing a mortgage easier.
Loan features like flexible repayments, redraw, and offset sub-accounts can also be a great benefit and help pay off your mortgage faster. The ability to choose your payment frequency can also make repayments more manageable.
Step 3: Secure a loan
It’s time to gather the needed documents and apply for a loan. Different lenders have their own set of requirements and processes. The application and approval process can range from a few days to weeks depending on both the lender and how quickly you can provide and return all documents.
If you’re looking for a fast and convenient loan application, loans.com.au offers an easy and streamlined online application process. You don’t have to go to a physical office or wait ages to speak with someone— everything can be done on your computer or smartphone. Apply online today!
At loans.com.au, we offer borrowers a range of low rate mortgage options. To learn more about our home loan deals, get in touch with us by calling 13 10 90. Or schedule a call with one of our friendly lending specialists.
Should you get a pre-approved mortgage?
Getting a conditional home loan approval is also a good idea if you’re not ready to apply for an actual mortgage. You can apply for a pre-approved loan online, as well.
Although not a guarantee of approval, a pre-approved loan helps you get your foot in the door so to speak. You’ll get an idea of how much you can borrow from a lender, and it will show sellers that you’re serious about buying a home.
Step 4: Search for the ideal property
Now for the fun part—house hunting! Spend time researching the property type, the area, and the size of home/land you can afford. Use property reports and see what similar property types have been sold for to see what your budget can buy.
Property and suburb reports can be a great way to research an area so you can find the perfect property. At loans.com.au, we provide free property reports and suburb reports that include information such as estimated property value, suburb insights, and more.
To streamline your home search, it’s best to create a strict list of must-haves and deal breakers. You can easily cross out properties that don’t meet your criteria so you can save precious time and effort.
Also, know when to be flexible and when to stand your ground. For example, simple cosmetic issues like paint colours can be changed quickly but a home’s features and layout won’t be an easy fix.
Step 5: Make an offer
When you’ve found a house you like, it’s time to put a bid on it. If you’re buying a property through a private sale, you have two approaches:
- Conditional offer: This is when you offer to buy a property if certain conditions are met such as property valuation, building and pest inspections, and the like.
- Unconditional offer: With this offer, you’ll be buying the property outright without any terms and conditions.
Also, talk to the seller about how they’re receiving offers. Some may want you to provide a formal letter via email, complete a form, or complete a formal ‘expression of interest’.
How do I negotiate with the seller?
Understanding why someone is selling their home can make it easier to present an enticing offer. When you’re presenting an offer, don’t just think about the price. Having amenable terms and conditions can also help make your offer stand out.
Step 6: Exchange contracts
Review the contract of sale carefully. You and your conveyancer should have at least discussed the settlement process, the value of the property, and the deposit required.
Before signing anything, obtain a pest and building inspection report, and an easement and boundaries report to make sure that there are no unexpected issues with the property.
If both you and the seller are happy with the conditions, it’s time to sign and exchange contracts. This is also the time when you need to pay the deposit.
The contract should include the complete address of the property, the name of the seller and buyer, the selling price, terms and conditions, and the settlement date. Your conveyancer and the seller’s solicitor should be the ones to arrange the transfer of the legal title of the property and arrange loan documentation.
What is a cooling-off period and when does it start?
The cooling-off period is a time when you can withdraw from the sale of a property within a specified number of business days without legal consequences. The exact timeline and penalties associated with the cooling-off period vary per state.
Step 7: Move in!
Congratulations, you’ve successfully bought a new home! Once the settlement comes to an end (typically after 30 to 90 days), it’s time to move in and start paying off your mortgage.
Buying your first house can be a nerve-wracking feat. A house is one of the most important and expensive purchases you’ll ever make so it’s important you get it right. Understanding the basics can go a long way.
Find out in under 2 minutes if you qualify for one of our low rate home loans.
About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
