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First time home buyers: The ultimate guide to buying your first home
85 Plays4 days ago
In this episode, Jayden takes you through the entire journey of buying your first home in Australia. From securing mortgage pre-approval to making a successful offer and navigating the settlement process, he covers each critical step with practical tips and insights to make the experience less daunting. This guide will equip you with the knowledge you need to confidently take the next steps towards homeownership.
Looking for more support on your journey to homeownership? Visit huntergalloway.com.au to get started.
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Transcript
Introduction to First Home Buying
00:00:00
Speaker
Hey guys, Jayden from Hunter Galloway here. When I was first buying my home, I was totally overwhelmed, so know how hard it feels. But it doesn't have to be that way for you. I'm going to guide you through every single step of buying a home. From getting your finances in order to signing on the dotted line, I'm going to make sure you're prepared and ready for every twist and turn that's potentially going to come your way. If you have absolutely no idea where to start or you're just at the beginning, this is going to be perfect for you.
00:00:24
Speaker
It's surprising, buying first home should be really fun and exciting, and it is, but it can also feel like one of the most stressful things of your life. You're putting down tens of thousands of dollars towards a home that's worth hundreds of thousands of dollars. But don't worry, it doesn't need to be stressful. You can know exactly what to do next to make your home buying journey successful.
00:00:42
Speaker
Welcome
Navigating the Australian Housing Market
00:00:43
Speaker
to the Buying Your First Home Podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
00:01:08
Speaker
All right, let's jump for right in.
Why Contact a Mortgage Broker?
00:01:09
Speaker
Step one, contact your mortgage broker. First things first, you need to make sure you've got your finance sorted and that means potentially getting your pre-approval or doing an eligibility check with the mortgage broker. This is the first step because it can be really confusing with online calculators not knowing your borrowing capacity, how much deposit you need, what grants you're eligible for, all that stuff. This step of the process will help you by speaking with a mortgage broker because you're going to know, well, basically, here's $500,000, here's $600,000, whatever it is that you've got available to go buy a home. Or worst case, you're going to find out exactly what your savings target needs to be.
00:01:37
Speaker
Doing this step gives you a really good idea of what you're working with and potentially by getting a pre-approval if you're ready, it's going to show the sellers you're pretty serious about buying a home. In this step, you can go to your bank directly if you want. I guess the benefit with going to the mortgage broker is they've got lots of different options. Not all banks have all the same first home buyer guarantee scheme, so you could be going to ANZ or Suncorpo that don't have the home guarantee scheme and they're going to tell you, well, you need a minimum of five or 10% deposit and you're going to pay lenders mortgage insurance.
00:02:02
Speaker
But down the road, there could be another bank offering the home guarantee scheme, which means you only need a 5%
Assessing Financial Situations with Brokers
00:02:07
Speaker
deposit. If you're a single parent, you only need 2% deposit. So there's a bunch of other schemes there that you could be eligible for. Assessment of financial situation. During this finance process, your broker is going to help you assess your financial situation. They're going to look at your income, job history, potentially do a credit check too to make sure everything is looking spic and span. This is when they're going to need to get all your paperwork. It's going to seem like a bit of genie around, but it does help having all that information up front to make sure there's no nasty surprises later on. The broker is going to ask you for proof of income like your pay slips, usually three to six months bank statements, details of any other debts you've got. A common one I see is once we do a credit check, there might be a couple of after pays or like an old G latitude credit card that's been lurking around in your credit file that you don't even know it's open anymore. These can really impact your borrowing capacity. A $10,000 credit card can reduce your credit limit by up to $50,000, even if you're not using it.
00:02:53
Speaker
A broker will help you work out and identify these
Budgeting and Pre-Approval Insights
00:02:56
Speaker
little things. The next step is to determine your budget. Once you've got your pre-approval, you've spoken to broker, you know your eligibility, you have a pretty solid idea on the maximum budget and purchase price you've got to work with. To be fair, this can get confusing because if you've just gone direct to a bank and they've said, hey, Jayden, here's your pre-approval, here's your budget, here's your loan amount of $500,000, does that mean I can buy a home for $500,000? Not quite.
00:03:16
Speaker
The purchase price you buy is determined by the purchase price minus the loan. Say if they approved me for 400,000 then I need to come up with the difference, 100,000. Again, this is where working with a broker is going to help you out because you're going to find out well actually Jaden, the maximum home you can buy your maximum budget is say 550,000. As a home purchase, you need to come up with $50,000 and the bank's going to lend you $500,000 for the rest.
00:03:38
Speaker
If you've gone through the pre-approval process, it's important to understand, I guess, the ask and limitations with pre-approval. Some banks will fully assess your situation with the pre-approval through bank statements, your pay slips and everything else, and you can go in with a fair amount of confidence that pre-approval letters shouldn't change within the next 90 days. They call this a fully assessed pre-approval. They could potentially lock in the assessment rate, which means that when they calculate any borrowing capacity, if the rates go up in the next three months, the capacity or the figures won't change. But there's also some automated desktop pre-approvals you can get from banks where they effectively just do a credit check. They didn't look at your pay slips, they didn't look at anything else. They'll send you the letter and there'll be a bunch of terms and conditions that say, well, this pre-approval is subject to credit checks, credit approval, getting your pay slips and all that information. That pre-approval, unfortunately, isn't worth the paper it's written on because you could always go back in a month's time, say like, I found a house, I'm so excited. Here's my pay slips, here's my details. And the bank's like, oh, I didn't realize that you had some missed payments in your account from two years ago. What's going on here? And they won't honor that original pre-approval.
00:04:33
Speaker
This can be entirely stressful, so again, work with a mortgage broker that knows and understands the home buying process intricately. You want to make sure that the pre-approval you've got is fully assessed and fully verified and in other words auction ready. You could go make an offer, up potentially waive your finance clause, which sounds a bit crazy, I'll come back to that, but it's a pre-approval you can trust. The next step in the process is to start looking at properties.
Defining Property Preferences
00:04:54
Speaker
Once you've got your pre-approval in hand, it's time to start house hunting. But before you start diving into properties, make sure you know what you're looking for. This is one of the biggest mistakes I see people make all the time. You might fall in love with the property online. It's in the sales section. It's sort of within your filters. You know, if you've got a budget of up to, say, $700,000, it's sitting and then you're like, I'm ready to make an offer. This looks amazing. You contact the real estate agent and they say, oh, it was actually offers over $700,000 and upselling for $800,000.
00:05:17
Speaker
It's completely depressing. To avoid this from happening to you, I recommend doing three things. You're going to be really crystal clear on what success looks like. Specifically, shortlist three suburbs that you're looking for, determine what kind of property you want. Is it a townhouse, a house, is the yard important, is it nice to have, and how many bedrooms?
00:05:33
Speaker
And that's the biggest mistake a lot of first phone buyers make, is that the suburbs and the types of properties they're looking at doesn't align with their budget. If you're looking for a four bedroom house in Mossman and you've got an $800,000 budget, you're going to be pretty disappointed. So then you've got a choice to make. Do you buy a house in a different suburb or do you look for a different type of property? For example, you might not get a four bedroom house in Mossman, obviously you won't, but you might be able to get a unit or a townhouse, you know, further out.
00:05:55
Speaker
So the suburbs, the property type and number of bedrooms are the main levers that you can use to help and find affordable suburbs and start actually looking for properties. The best way to check whether the target suburb is affordable is to head to domain or realestate.com.au, go to the recently sold section, put in your filters, your target property type and make sure you're looking at sales that have happened in your budget within the last three months. The property market at the moment is moving pretty quickly and this is another place where I see lots of people make a mistake that leaves them disappointed.
00:06:20
Speaker
If you're basing your budget on properties that have sold over 12 months ago, you're going to be completely underestimating the market price. For example, in Brisbane, house prices have increased by almost 18% over the last 12 months and units have gone up on a 23% average. If you don't take this into account when you're looking at the right suburb to buy in, then you're going to be targeting a suburb that could have shot up in price over the last
Property Inspections and Strata Reports
00:06:38
Speaker
12 months. Thoroughly inspect properties. Once you've dialed in on your target suburbs and property type, then you can start checking out real estate listings and attending open houses.
00:06:45
Speaker
When you find it properly you're interested in, you want to be as thorough as you can in the inspection. Honestly, those in another video, but I can't stress this enough, check everything. Turn on the taps, make sure the water pressure is good. Test all the lights inside and out to see if they're working. Open and close all the doors and windows to make sure they shut properly and don't stick. Test the appliances like the oven, the dishwasher, the range hood. Look at the walls for cracks, scratches, and signs of pests. Look for droppings and nests and that sort of stuff. We have a checklist which will be in the description below that you can use and I strongly recommend you using it when you're looking at properties. It's easy to forget some of the minor details when you're co-op the inspection process, there's lots of people, the agent's asking if your name and number and all these details, but potentially if you buy that home, if you move in, they're not going to tell you that the arrangement hasn't been working for a couple of years and that window's a bit gummy to open. If you're buying an apartment or townhouse in the Strata scheme, there's a bit more to think about as well. Strata or body corporate living means that you're not just buying a property, you also buy a community and sharing responsibilities for common areas of the building. The key thing to understand in this is something called a Strata Report. The report includes financial statements, meeting minutes from the owner's corporation or body corporate and maintenance plans. It gives you a good look into the building's financial health and how well it's being managed.
00:07:47
Speaker
Listen, I can tell you first down how important these are. When I was first applying place, I was looking at an apartment. They always looked really good on the inside and I couldn't see any problems with the building. But after getting a the Strata report, I found out that buildings had major structural issues, concrete cancer. They'd been ignored for years and had hefty fees on the way. I would have been out of pocket tens of thousands of dollars if I'd gone ahead with some of these dud buildings. That's why it's important to examine the strata reports, do a body corporate check, go through the minutes because you're not just buying unit, you're buying into the buildings overall health. If you're looking at a unit as well, it's worth inspecting some of the common areas of the property. Look for signs of poor maintenance like cracks, water damage, neglected gardens. These can indicate how proactive the owners corporation is. Hiring a building inspector.
00:08:28
Speaker
Doing your own inspection is a good first step in due diligence, but you also want to hire a professional inspector to help along the way. If you're buying by a private treaty versus auction, you can add a billion pest clause to your contract to make sure you're not wasting money on an inspection of every property you're buying and making offers on.
00:08:43
Speaker
If you buy an auction, then you need to get an inspection done before the auction because auction contracts are final. There's no clause in there to protect you if there's other issues that can found out afterwards. The building and pest will cost you around $400 to $600 depending on the size of the property, if it's a house, sometimes more, but it's definitely worth every penny.
Hiring Professionals for Buying Process
00:09:00
Speaker
Keep in mind, if there are major defects with a home, it can cost you thousands of dollars to fix. So this report, even though it's $600, it's like stitching time stays nine sort of situations. Get a conveyancer. While we're on the subject of getting professionals involved, it's important to engage a conveyancer or solicitor early in the home buying process.
00:09:15
Speaker
The conveyor is going to need a specific property to do their job, so you only need to engage them once your offer has been accepted. But it's worthwhile having those details because when that happens, it all happens pretty quickly. If you're unsure about what sort of clauses to put into the contract or even want someone to review it, before you sign anything, it's worth sending it to your solicitor conveyor to double check the contract to make sure everything's hunky-dory and got all your legal bases covered. In Queensland, for example, a lot of Asians prefer that offers are made on signed contracts. So having your conveyor ready to review contract and guide you is pretty beneficial.
00:09:42
Speaker
In Victoria, it's ideal to have you conveyance review the section 32 before making offers just to make sure everything checks out. Some conveyancers even offer a free review as part of their service which is pretty good especially for first-hand buyers to avoid just any costly mistakes on the contract. Auctions, it is critical, it is essential to have a conveyance or review the contract beforehand as auctions are unconditional. Now, it's not legally required to have a conveyancer but getting someone involved is going to save you a lot of headaches and make sure you don't get stitched up on the contract to sale. Getting ready
Making an Offer: Valuation and Bidding Strategies
00:10:08
Speaker
to make an offer.
00:10:08
Speaker
Alright, so let's assume you've found a property that you love, you visit the open home and you're thinking about making an offer. There's a couple of things that you need to think about at this stage. Firstly, how much is the property worth? And secondly, what type of terms will I want with my offer? You can use automated tools like on the house or RP data to give you a quick and dirty figure, but unfortunately, this is where you're going to have to do a bit of your own research.
00:10:27
Speaker
Automated valuations can be a little bit behind in terms of the market and the suggested property values. And if the market's quickly, like it is in Brisbane and Perth and even Sydney, it can underestimate the property values by up to 10%. This is where that sold section in domaininrealestate.com.au comes back into play. Just like when you're shortlisting your suburbs, you're going to want to look for recent sales of comparable properties. This time, you're going to want to do it in a lot more detail. Each property that's sold in your target suburb do a quick comparison. Are they in the same condition, the same land size? Are they in different locations and could that affect the price? Compare these properties to the one you're looking at buying. This is going to give you a solid idea of what people are paying in the current market and help you position your offer accordingly. Once you've settled on a property value, you're going to have to think about the terms of your contract. For example, a subject to finance clause protects you if for some reason your loan doesn't get to the final unconditional approval. A subject to building pest clause lets you back out of the property if it's got significant issues with the building.
00:11:16
Speaker
These clauses not only protect you but also give you room to negotiate with a seller if problems are found. Also consider the settlement terms as well. Settlements when you move in. So standard settlements range from 30 to 90 days depending on the state you live in, but a shorter settlement can sometimes make your offer more appealing to the seller. Especially if they're eager to move quickly, they might have sold, they might be relocated, there could be lots of reasons. Just make sure you're comfortable with the time frame and speak with your broker to make sure the bank can actually settle within that. Keep in mind if you don't settle on time, there are penalties. So again, check the broker, make sure it's all possible. You can also talk with your broker on those finance clauses. A standard finance clause or billing impasse might be 14 or 21 days, but if it's a competitive market and your broker can get things moving quickly, you can look at dropping them to seven days or even less. And in a competitive market, that can make all the difference. These clauses are here to protect you in case something goes wrong in the home buying process, but they can make your offer less attractive to the seller. If there are multiple offers on the table, a seller might choose someone that might be an investor, for example, and completely waive or remove these clauses. So this is where you might need to weigh in the importance of these protections,
00:12:12
Speaker
against the competitors for your offer. Remember everything is negotiable until the contract signed. Work closely with your conveyors for a solicitor, to understand the implications of each term and what it means if you wave one of them. Being strategic can help you beat other offers and hopefully get you to secure the home. Making Offer ah When you're ready to make your offer, make sure you put it in writing. That's gonna let the sellers and agents know you're serious and can avoid your offer from being lost if another one just comes along with a high number. Depending on your initial offer, there may be a counter offer from the selling agent. Now, this doesn't always happen. Depending on the market, sometimes the agents won't even come back to you if you're way too low. This is where the agents might start playing games. so You mentioned there's other offers on the table, you know, that kind of thing.
00:12:50
Speaker
At this stage, you're just going to have to be crystal clear on what you're willing to pay and try to get drawn into those sales tactics. In a hot market, we find more and more that first offer might only be your final offer. So you may need to go closer to your final amount to secure the home. But all going well, your offer will get accepted. And once it is, you'll sign the contract and get moving through the formal loan application process.
From Contract Signing to Loan Application
00:13:09
Speaker
Before I do that, let's chat about buying at auction because it's a little bit different. Buying at auction is a bit different from a private sale. First, you want to have your solicitor conveyance to review the contract to help and make any amendments. Going to auction, you're going to be a little bit more limited in this and the seller could just say, no, we're not going to take those amendments. He's just a general contract. We require a 30-day settlement and you have no chance to negotiate that.
00:13:28
Speaker
So like I said, in most cases, the only thing you can negotiate at auction are the contract settlement terms and the deposit percentage. Just keep in mind, if you win at auction, you go have to sign the contract immediately and you're unconditionally approved, meaning there's no subject to fines clause and you can't back out of it. For this reason, you want to be really confident with your financing because you're going to require to pay the full amount at settlement. Bidding strategies at auction is another big topic that we've got a whole other video, but the long and short of it is you need to decide when to start bidding.
00:13:52
Speaker
how much you can increase your bid to buy, and most importantly, what the maximum in your walkway price is. So we're back on the process, you found a home, you had your offer accepted, you've got the contract, now's the time to get the loan approved and start packing your boxes. Once you've got the signed contract to sell, you'll take it to your broker to apply for the formal loan approval. Assuming the bank hasn't changed any of its lending policies, then you should be on track to get your formal approval within a couple of days. Generally, the bank might only want an updated payslip and the contractor's sale will get a valuation on your new home to make sure it's worth what you've paid. If you have a subject to Billion Pest inspection clause in the contract and haven't engaged an inspector yet, now's the time to do it. If the billing report comes back unsatisfactory, you can always back out the sale, but potentially you can also use that to renegotiate the price. Remember backing out of the sale with the Billion Pest isn't an option after auction. So make sure you do all those checks upfront.
00:14:36
Speaker
If in a worst case scenario, the bank rejects your loan, they've got an issue with the property and you can't find another lender willing to finance you, the subject to finance clause will protect you here, meaning you can potentially walk away from the deal, get your deposit refunded depending on the state and move on to the next one. Again, get legal advice around this. Make sure you get everything checked before you sign anything because once you sign it, it's all legally binding.
Settlement Preparations and Final Inspections
00:14:56
Speaker
settlement period. So assuming you're all gone well, your loans formally approved, you're going to enter the settlement period. During this time, your conveyance will prepare the necessary documents like the transfer of land and your mortgage broker is going to come up with a loan contract for you to sign and put pen to paper. Your conveyance will also help set up a shortfall account. So that's called a settlement shortfall account and that's where you put sort of the extra deposit for stamp sheet and everything else into that comes out at settlement.
00:15:18
Speaker
A few days before settlement, you're entitled to a pre-settlement inspection to make sure the property is in the same condition as it was when you signed the contract. You need to contact the real estate agent to arrange this. If you find any defects or junk that's been left there, make sure you notify your conveyor immediately and they can work at the seller's to get it resolved. What I saw recently was where real estate agents had removed a bunch of staging furniture and left a heap of holes in the walls and scratches on the timber floor. My clients emailed the solicitor and said, hey, this wasn't like that before. Can you get it fixed up? They had to get it all sorted out before settlement.
00:15:44
Speaker
On the day of settlement, you can basically send your final breakdown of how much needs to be paid. If the bank is lending you 100%, for example, if you've got a guarantor, then you're all set, you don't need to put anything in. But if they're lending 80% as an example, you need to put in your 20% deposit, then you need to make sure that's in the solicitor's trust account or in your bank shortfall account before settlement.
00:16:02
Speaker
On the settlement day, there's really not much that you need to do. The solicitor conveyance will book you with the bank, the sellers and move the money across and everything's there. It happens electronically, it goes through, you'll get a phone call from your solicitor or your broker saying congratulations, you got settlement and then it's time to get a pick up the keys from the real estate agent. And there you have it. That's a complete step-by-step guide to buying your first home in Australia. We've walked through everything from getting your finances sorted to your mortgage pre-approved, to searching for the perfect home, making an offer and then settling into your new home. Remember the key steps are Firstly, obtain a mortgage pre-approval. Get your finances in order by reaching out with a broker who can help shop around for the best deal. To begin a property search and initial inspections, be crystal clear on what you're looking for and thoroughly inspect properties using professionals like Billion Pest Inspectors and Conveyances to check out the contracts.
00:16:44
Speaker
Three, get ready to make your offer. Do your homework on the property's value. Consider the terms and the contract carefully. Four, making your offer. Put your offer in writing, be prepared to negotiate and know your walkway price. Five, buying an auction. If you're going the auction route, make sure you're well prepared and understand the unconditional nature of the auction process. Six, applying for formal approval. Work with your broker to get that final loan approval and navigate any hurdles that come up. Seven, the settlement period. This is where all the legalities get signed, paperwork is signed,
00:17:11
Speaker
Do your preset on inspections and get ready to pick up the keys for your new home. I hope this guide has made the whole process a little less overwhelming and a lot more manageable. Buying your first home is a huge step. With the right preparation, it's super achievable. If you're feeling ready to take the next step and need any help with getting your pre-approval sorted, hit us up at Hunter Galloway. We help home buyers all across Australia. We're here to make the process as stress-free and easy as possible.