The Essential First-Time Home Buyers Guide
So you’re finally going to do it. You’re leaving the renting world behind and are looking to buy your first home. We’d like to congratulate you by bringing you this essential first-time home buyers guide!
Buying your first home is an exciting step forward in your life. It’s the Australian dream.
You’re probably a bit nervous and excited all at the same time.
Nerves for first-time home buyers is normal! The last thing you want to do is make a mistake that could cost you thousands of dollars or leave you locked into a home you’re not completely thrilled with.
So let’s not let that happen.
In this first-time home buyers guide, we’ll walk you through 9 key things you need to know before taking the leap.
Now let’s take a look!
1. Make Sure You’re Eligible for a Home Loan
Have you looked into how much the bank will borrow you for your home? For first-time home buyers, this is the single most important factor in your decision.
If you can’t get a loan for the amount you’ll need, there’s no point in house hunting.
There are several variables that banks consider when determining your eligibility for a loan.
Your income level
Evidence of your current assets
Your household budget
Debts you currently carry
Be ready to provide detailed documentation of each eligibility requirement when you head down to the bank to discuss a home loan.
2. Are Your Finances Currently in Order?
No home buyers guide would be complete without discussing the current state of your personal finances. When a bank looks at your loan application, they want to see that you have the ability to make all your repayments.
If you can demonstrate that you have a strong record of saving money, you’ll be looked at much more favourably. We do advise on seeing a broker first, they will help you get organised so you have the best opportunity to get a loan.
In addition, before applying for a loan, focus on paying down your existing debts. Close the borrowing accounts you have after paying them off. If you have ongoing debt, keep on schedule with your payments.
Always work to maintain as high of a credit rating as you can.
In addition, your proof of income is one of the highest factors in getting a home loan. Banks strongly consider employment security. They’ll also require proof of income such as PAYG summary, payslips, and past bank statements.
If you’re self-employed, you’ll need to show your individual tax returns, profit and loss statements, business tax returns and balance sheets.
3. Get In the Market as Soon as You Can
Australian capital city housing markets are extremely competitive. They’re more reliable over the long-term and offer financial advantages, especially when it comes to taxation benefits.
To find the best fit for you, you’ll want to jump into the market as soon as you know what your housing budget is.
However, be prepared to compromise. You might not be able to land a home with the exact type, location, and condition you have in mind.
Put your first step on the staircase and as you begin to go up, continue to broaden your choices based on what you’ve seen.
My first property was a small 2 bedroom unit. this was not my dream home, BUT, it was my first step. And it payed off. That unit then helped me buy 2 more properties and it is still paying off. And now we are currently considering in selling it to build our next home.
4. Affordability is #1
When you’re buying your first home, a top consideration to focus on is affordability.
This will require some level of compromise as you shop for your new home.
Don’t think too much about the prospect of price growth or how interest rates might move in the future. None of that matters if you can’t afford your bank payments.
Strongly consider established suburban homes. They offer a great entry-level opportunity for first-time home buyers.
Another aspect of making your new house affordable, is to consider duel living. When my wife and I bought our current house. we agreed on a budget and if we went over our affordability we would choose a house that has duel living so we could use the additional rent to help cover our cost.
5. The Sales Process
Before you start shopping, think about which sales process will serve you best. I also recommend using a buyers agent.
A buyers agent will cost you a bit of money, but they could save you thousands of dollars in the long run. They know the buying process and the know how to bargain hard for a good price. They also are professional at auctions.
The best part about using a buyers agent is this: They are not emotional about buying the property. We can tend to get excited about buying a property we love, and offer more money then necessary to buy the property because we are emotionally attached.
Are auctions they way you want to go, or would you prefer to look into private sales?
Research how each option works in your state. Get a strong understanding of each process and what your responsibilities and rights are within them.
Auctions are hot right now because of how they’re portrayed in the media. Remember, a lot of this is theatre.
Private party sales are by far the most common property transaction.
6. Get Expert Advice
Before you sign a contract of sale, get legal advice.
You’ll want to know everything possible about the property before you sign contracts. Not after.
Everything you’ll want to know about a property is fully disclosed in the contract of sale and title. You’ll want a lawyer or conveyancer to give a thorough look through the documents.
The bank will also require a “Building and Pest” report as well. This will cost you a couple of hundred dollars. But it is worth having a professional inspect the building , to point out any potential problems.
7. Research, Research, Research
When you attend open-for-inspections, don’t rely on only what the agents share with you.
For example, an agent may only mention the highest priced similar properties that have been sold in that particular area. There could very well be six other examples of properties that sold for a lower price.
8. Be Ready to Jump at a Moment’s Notice
Get all of your financing approved and ready to go before you start house hunting.
That way, when you find the home you want you can jump at it immediately before your competition beats you to it.
Depending on where you are in Australia, some markets are more aggressive than others. And it can also be a great source of frustration when you find the property you like, and it sells before you are ready.
9. Avoid the Dreaded Lemon
Many homes have serious problems such as:
Electrical or plumbing issues
Termite or insect infestation
Any of these issues could end up costing you tens of thousands of dollars to repair.
If there are multiple issues, you could end up with bills totaling up to $100,000.
That’s no way to start out as a first-time home buyer.
Your best bet is to hire a building inspector to give the home a complete inspection. If they find existing issues, they can let you know what repair costs will total.
Remember that when you buy a home, you’re buying it “as is”. If you find problems with it later, they are your responsibility to take care of.
There’s Your First-Time Home Buyers Guide!
By now, you should have a much better idea of what you’ll need to do to become a home buyer.
It’s an exciting time in your life. Hopefully, this home buyers guide will make the process much easier for you.
When you’re ready to invest in property, take a look at our many resources that can help.
Good luck in your journey!