10 Key Steps in the Property Buying Process
Don't know where to start? Here's a quick checklist of 10 key steps in the property buying process to get you started.
1. Research
Research the market thinking about what you value most in your first home – an apartment close to the CBD, public transport, beaches, parks, cafes and restaurants or land where you can build a home near schools, shops and playgrounds. Check out the median prices and recent comparable sales (there’s plenty of information available free online) and delve a little deeper to find out what economists are saying about future growth prospects. Remember that your first home may not be your forever home and the right choice may be just a stepping stone to your next purchase.
2. Finance Health Check
Conduct a personal financial health check by first creating a budget that identifies all your expenses and income. To be in a position to save, your income has to exceed your outgoings. If you’re struggling to show a surplus take a hard look at where your money is going looking for ways that you can reduce personal expenses. It could be that credit card debt is a financial drag and that‘s the first problem you need to rein in. Click here to download your Financial Health Check guide.
3. Costs & Benefits
Add up all the costs associated with buying a home and any benefits such as First Home Owners Grants, developer offers and stamp duty exemptions. On the cost side you need to factor in extras such as building and pest inspection, stamp duty, Home Loan Establishment Fee, Lenders Mortgage Insurance, Legal Fees, moving costs, utility connection, house and contents insurance, strata levies and furnishing. A benefit to buying off the plan is the opportunity to forgo building and pest inspections and to save on stamp duty fees. At this stage it’s important to understand how Lenders Mortgage Insurance (LMI) can affect you. If you have less than 20% of personal savings to put down on the value of the home you plan on purchasing, your lender will probably minimize its risk by requiring you to buy insurance prior to signing off on the loan. One way to avoid paying LMI is to make a down payment that is equal to at least 20% of the purchase price of the home.
4. Borrowing Capacity
Work out your borrowing capacity by speaking to a bank or mortgage broker. Although lenders are being much more cautious, mortgages are still an important part of their business. You’ll get an idea of how much they’re prepared to lend which will help you to refine your search or set some goals to achieve your savings target and your first home. You should aim to get a preliminary loan approval before you start making any offers, pre-approval generally lasts for 12 months so if you miss out at auction or on a private sale you can continue the home hunt. Click here to watch our finance expert.
5. Preliminary Loan Approval
Once you have preliminary loan approval you will be confident knowing how much you can spend when you’re on the hunt for your first home. Now is the time to talk to a lawyer or conveyancer so that when opportunity arises you’re ready to act. If you’re planning to rent out your home you should also have an accountant on your side to advise on the most tax efficient way to purchase. The fun part now begins when you can start seriously looking for a place to call your own. It might be a journey you do on your own but it doesn’t hurt to have a friend or relative along for advice and emotional support.
6. Team of Experts
Once you’ve zeroed in on your home of choice it’s time to bring in your team of experts – your lender and lawyer/conveyancer. Before your home loan is formally approved the bank will undertake a valuation of the property to make sure it aligns with the selling price. Your lawyer will check the contract and it’s at this stage that you might like to discuss any variations. Mirvac’s Property Experts are also here to help, meet them here.
7. Building & Inspection
Building and pest inspections are a must whether the home is second hand or brand new. A strata inspection for an apartment is another box you’ll want to tick as it will reveal whether there are unresolved defect issues that you’d be wise to avoid. These inspections can be avoided when buying off the plan.
8. Contract Signing & Exchange
With all the checks complete you can proceed to exchange, usually with a 10 per cent deposit. This sum can be varied with the vendor’s agreement.
9. Cooling Off Period
If you buy at an auction there’s no cooling off period which applies in most states when you buy by private treaty. So you want to be pretty certain that you have your finance in order, the contract is solid and you really want the property before putting down any money.
If you don’t buy at auction, and for example, buy directly from a developer, the following cooling off periods are available in each state:
o New South Wales
o Victoria
o Queensland
o Western Australia
10. Leading up to Settlement
Before your home loan is formally approved the bank will undertake a valuation of the property to make sure it aligns with the selling price. Before settlement you’ll receive a pre-settlement adjustment from your solicitor, detailing stamp duty, any stamp duty concessions and the First Home Owners Grant. If you have purchased a home or apartment, you should also have a pre-settlement inspection and make arrangements for insurance of your new home. Make sure you double check your numbers also, you know your situation better than anyone.
11. Settlement
The big day finally arrives when you become the proud owner of a home, apartment or block of land to build a place to call your very own. This is when your team of experts comes into its own. Your solicitor will liaise with your lender and the vendor’s solicitor and once final payment is made, usually through an online system called PEXA, the property is legally yours. Don’t forget to arrange for your relevant utilities to be connected too.