Being a first home buyer in Australia often means a long journey. From your first dream of home buying to the final day of settlement, there’s a lot that goes on from A to Z. Last time I wrote here was about the lifestyle and long-term plans you need to consider when looking to buy your first home. Now it’s a good time to look at the nuts and bolts of it.
At the start you likely have a general idea of the process involved in the first home journey. Then you get a deposit saved, and you’re ready to go through the formal process to get your first home.
So let’s look at how you go from your first dream to getting the keys with a home loan.
1. Plan Your Calendar for It
At some point every young Aussie considers buying their own home. For most of us, the Australian Dream still has a big appeal. It’s a tougher dream to achieve today than it was years ago, and this has been a big change. What hasn’t changed is buying a home anywhere and anytime requires some timing. From first dream to walking into your new home, it will take 2 months at a minimum. Likely a couple more. Especially if you are buying in a quieter time of year (such as winter) when there are less listings.
You should also allow more time if you are not set in stone about what sort of home you’ll buy and where. Turning your dream into reality will take some time, research, and exploration of buying areas. Realistically, 6 months is a good timeframe to set aside for finding a good property that meets you needs. Like Rachel Hunter used to say in the old cheesy Pantene ads, ‘it won’t happen overnight but it will happen‘.
2. Find out How Much You Can Borrow
Where you buy your first home will depend on personal desire, but also be impacted by your income. A good deposit alone won’t pay off a home. More income allows for more borrowing.
To get an idea of what you can borrow with a mortgage you need to try a borrowing calculator.
We have a really good one here. After an estimate you may be disappointed, or you may be uplifted. Either way, when it comes time to make an official application there’s a few variables that can raise or decrease the actual amount you can borrow. The best way to find out how much you could get exactly is by making an official application!
3. Get Pre-Approved for a Loan
Once you know how much you can borrow it’s time to apply for pre-approval. Pre-approval of a loan allows you to buy a home even if you don’t yet know its exact cost. A lender will give you pre-approval for a loan up to certain amount, for example $750,000. You can buy a home at any price below that figure.
4. Make an Offer on a Place You Like
When you have found a home you like that is in your budget it’s time to make an offer. Keep in mind the offer process can differ from one part of Australia to another, and among different real estate agents. Some may allow you to make a simple offer via email, while others have a more formal process.
What sort of offer you make will depend on you, but keep in mind you’ve the power to tailor it:
‘This offer must be accepted by [date] to be valid’
‘This offer is conditional on an imminent building report revealing no structural issues’
‘This offer is made subject to finance‘
..are all common conditions.
Once you have made the offer it’s a matter of playing the waiting game.
5. Sign the Contract to Your New Home
When you receive word you offer has been accepted you are almost finished, but some red tape remains. You need to notify your lender your offer has been accepted and provide them the address of the home. A lender may send out a valuer to confirm the price of the property.
All being well, it’s time to sign the contract, and pay the deposit. Your lender will pay the full amount for the property when the settlement date arrives, and your home loan repayments will begin. Meantime, you can pop the champagne and look forward to owning your first home!
Bonus: Speed It Up by Working on Multiple Steps at Once
These are 5 steps every first home buyer must complete before getting the keys to a new home. But you don’t need to do them one by one. You can begin discussing an offer on a new home right now! While auctions require you to be ready to buy on the day, private sales are different.
Some sellers are keen to sell their home pronto and get a fast settlement. Others are in less of a rush, and happy to let a property sit for a while on the market. It’s important you don’t commit to making an offer until your finances are in order, but general enquiries are OK. You can ask what’s the demand is like for the property, and if they could wait for you to prepare an offer.
Some vendors won’t be interested, but others will wait if they know an offer is incoming. This example is just one way of many you can be proactive as you go through the 5 steps.
There’s nothing to stop you right now from browsing homes to get a sense of prices and demand. You can also visit open houses for inspection to see what the process is like up close. Doing this now can also help ease your nerves when the time comes to bid at auction or buy.
No Matter What: Keep On Keepin’ On
By any measure buying a first home will be one of the biggest steps in your life. It is exciting, but can also be daunting. Remember you have resolved to travel down this road, and it’s important to keep in mind that millions of other Aussies have gone through this process before too, and made a success of it.
It does require some real focus. Also some patience as things along the way can throw up hurdles. But most of all it requires positivity and persistence. Be optimistic, stay the course, and before too long you’ll be signing the contract on your new home!