The 5 proven steps to buying your first house

One of the biggest struggles when you’re doing something for the first time is knowing what steps to take and in what order. Buying your First home is no exception. So if buying your First home is something you really want to do, these 5 proven steps to buying your first house is exactly what you need. These steps will give you clarity to know what you need to do when to make your home buying as stress free as possible.

Step one – Do your research

The first step is all about research. From researching the market to your borrowing power there are so many things you can use this time to research so when you are ready to start house hunting you have confidence and clarity. So of the things you should be researching are;

Your Budget,

Have you got a budget in place? if not, getting one and sticking to it is a really good way to show your future lender that you can live within a certain budget. The other benefit to having a budget in place, is you then have accurate figures for the home loan application. Believe it or not, as part of your application Banks and lenders will ask for your ‘Monthly living expense’ they will then cross reference it with your bank statements and question anything that doesn’t fit. Having a budget will mean you know your Monthly living expense and should it differ from your actual expenses you will know why and can discuss that with your Mortgage Broker.

The total borrowing cost,

Something a lot of people neglect to consider is the total cost of buying a home. Sure you need your deposit to put towards the purchase but you will also need a little bit of cash to put towards things such as Building and Pest inspections, Solicitor bills ect. Your Mortgage Broker should be able to do you up an estimate to show you what the total cost would be so you know you are accounting for everything and ideally, leaving a little bit of ‘emergency’ money left in your account after settlement.

Your borrowing power,

Knowing how much you can borrow is really important. It may mean you have to make certain sacrifices to get your First Home. This is generally something you can work out using online calculators but the real test is when you talk to your Mortgage Broker. Particularly because all banks and lenders have different criteria when it comes to type of income used and types of expenses. Talking to your Mortgage Broker they can give you an estimate on how much you can afford to borrow across multiple banks.

How much can you repay?

This is such an important questions, and I urge you to give it some thought as part of your research. Just because a Bank or lender says you can afford to repay $500 a week in repayments may not mean you can. Perhaps you’re paying $430 a week in rent and that’s the top of your budget. Spare some though for what repayment you would be comfortable repaying and this amount should also be what you are either paying in rent already, saving into a savings account or a combination of both.

List of Must Haves,

Everyone has some not negotiable when it comes to a home. I for one, insisted my second home was high on a hill ( post 2011 floods when my First Home was destroyed). Spare some thought to list out, what are your not negotiable when it comes to your home and what are you willing to compromise on?

Property prices in the area,

Knowing what properties are currently selling for will help you to see what you can get for your money. Even working in the finance industry, and seeing Contracts on properties all day I loose touch with what prices homes are selling for. You can get a lot of information on the internet these days and you can also ask your Mortgage Broker for some Property reports and suburb reports to give you an idea on recent sales.

Step two – Talk to the experts  

Now you have a better idea of the market, what you can afford and what it will cost you its important to move to the next step which is putting together the team of experts to help you along the way.

The Mortgage Broker,

I would always suggest you find a mortgage broker you like and trust. Firstly, because a mortgage broker has access to over 30 different lenders and their different policies (rather than one bank, one policy) and secondly because your mortgage broker will become your financial support ongoing. Anytime you have a finance question or want something looked at in your finances it’s your mortgage broker you will phone to chat to, so it helps if you like this person.

Conveyancer / solicitor

I have a lot of clients who phone conveyancer to ask what their fees are and that how they choose their conveyancer. I get it, buying a home is expensive and you need to save every cent you can, however I have seen the stress a ‘not so helpful’ solicitor can cause, and I’ve also witnessed the difference a supportive solicitor can make. Make sure when you’re talking to conveyancer that they are responsive to your calls and emails, ask what guidance they can offer to support first home buyers and, if possible, consider a solicitor that can do your Will and Power of Attorney at the same time. Carolyn Ryder from Carolyn Ryder Solicitors has helped a lot of my First Home Buyers and you can find her details here: https://www.carolynryder.com/

Building and Pest

Again, a building and pest inspection is another cost you don’t want to pay too much if you don’t have to. Having said that in addition to the price I would be looking for a building and pest inspector that can ideally do both inspections at the same time (rather than having to arrange a separate building and a separate pest) and a building and pest inspector who was approachable and happy to chat about the report and any questions you may have. I have a lot of clients that use and love Les from Resi Inspections, you can find his details here: http://resii.com.au/

Buyers Agent / Real Estate Agent

You may not have room in your budget for a buyers agent but if you do, you will find they are a valuable resource. Particularly for first home buyers who don’t have time to go to open homes on the weekend, don’t know where to start when negotiating on a property or are not sure about attending an Auction. Your buyer’s agent may also have access to properties that aren’t listing on the market yet, which means you can jump in with your offer before everyone else. Shane Martin and his team at Property Boutique can help you either find your home or, help project manage the Build of your First Home. You can contact them here: https://pboutique.com.au/

Financial Planner

Financial planners are focused on building wealth for their clients and contrary to believe this isn’t only in the Share Market. A good financial planner will take the time to get to know you and your long term plans and then tailor some recommendations based on what you want to achieve and your level of risk comfort. Financial planners can also review and update your personal insurance with is vital when you are buying your first home. You want to know you can afford the home now, and in the future if anything was to happen. Brent from Active Wealth & Retirement Solutions has not only looked after my clients but he has done my personal financial plan too. You can contact him here https://activewrs.com.au/  

Step three – Get a preapproval

This step seems pretty straight forward but it’s not. There are two types of pre-approvals, and one, unfortunately, isn’t worth the paper it’s written on

Fully Assessed Pre Approval

A fully assessed pre-approval is when your Mortgage Broker has collected all the documentation and submitted an application to a Bank or Lender (of your selection) and come back to you with any questions, queries or concerns the Lender may have. This pre-approval means that a credit officer has looked at your application and based on the information provided they are happy to lend you a certain amount.

A Pre-Approval

I have seen a lot of clients, in a panic, after they have signed a contract of sale on their dream home only to be told by their bank, that the pre-approval they had is now declined. Typically I find that the bank or lender hasn’t done a fully assessed pre-approval, rather they have done some calculations and worked out your borrowing power based on some limited information. This can become an issue when you sign a contract of sale and a credit officer then reviews the application to see it doesn’t meet their policy or the information is incorrect or I’ve even seen the employment type was wrong and therefore the income was unable to be used. If you have a fully assessed pre-approval in place, it will stay active for up to 3 months providing nothing changes with your situation. To renew a pre-approval it is simply a matter of sending some updated information to your mortgage broker.

Step four – Research the Market

You may have done a little research back in step one but now it’s time to up the research. Your mortgage broker can send you property reports which show you how long a property has been on the market for, what the original purchase price was, what recent sales are in the area and much more information which will help you when you’re house hunting but also with negotiations. Make sure you’re realistic when it comes to the type of property and your ‘must haves’ you may have to make some sacrifices along the way depending on your budget.

Step five – Buy your home  

When you find a property you like, that ticks all (or most) of your ‘must haves’ and is in your price range this is when you can negotiate the price starting with putting an offer forward to the Real estate agent. This is when things can get stressful but the main thing to remember here (as corny as it sounds) is everything happens for a reason, and if you were meant to have this home you will. Make sure you put your 14 day building and pest clause and 14 day finance (longer if you don’t have a fully assessed pre-approval) so you can cover yourself should there be any issues with the finance of the building and pest. You will also need to have some cash to put down as a deposit when you put your offer in. Depending on the real estate agent this is usually a small deposit at this stage with the remaining (if any) to be paid when the contract is unconditional.  

What next?

If you read the above 5 steps and thought, ‘great but I want to know more’ then the First Home Buyers program is the perfect program for you. The course is set to launch in November however if you want to get discounted access when it goes live click here. I’ll also throw in a free First Home Buying Checklist 😊

As always, if you want to chat to me about buying your first home you can book a time here.