AN INTRODUCTORY FIRST HOME BUYERS GUIDE

The Pre-approval Process

Are you toying with the idea of entering the property market, but not quite sure where to begin or how much you can afford? As a starting point, you may want to consider obtaining home loan pre-approval.

Pre-approval (sometimes referred to as conditional pre-approval or approval in principle) is an indication from your chosen lender as to how much you may be eligible to borrow, subject to certain conditions. The lender provides this indication after assessing various financial factors such as your employment status, salary, credit history, assets and debts.
If you obtain pre-approval, it will be for a certain dollar amount which will help you to set some budget parameters and by extension, refine your property search. Whilst it isn’t a guarantee that your final loan application will be approved, it provides you with a fair indication of your borrowing capacity and allows you to bid with some form of confidence. Pre-approvals are generally valid for three to six months, depending on your chosen lender.
Your MoneyQuest mortgage broker can guide you through the pre-approval process step by step and submit the application on your behalf.

Key Things to Consider When Looking for a First Home

Once you have your pre-approval organised, you can house hunt with a bit more confidence and clarity. But it is wise to do some research before taking the plunge and putting your hand up at an auction. Below are some key things to consider when weighing up a property purchase:

Location: where you buy is considered by some to be just as important as what you buy. Perhaps even more so. Consider things like the property’s proximity to your loved ones and your workplace, as well as to parks, shops, freeways, and public transport. It is also worth looking into the safety of the suburb, the demographic of its residents and the area’s median property price.

Schools: if you have school-aged children, school zones are another factor to consider. Where you live can sometimes dictate which schools your children can attend.

Resale value: considering a property’s potential resale value is also important if you intend to upsize or move on in the future. Aside from location, there are various factors that can impact the resale value of a property. Some of these include the size and number of bedrooms, the property’s layout and whether or not if offers the potential for renovation, the age of the property, and the upkeep involved.

Non-negotiables: work out exactly what you can and cannot compromise on when it comes to the features of your new home. It is unlikely that you are going to find a property within your price range that is perfect in every way, so it is wise to think about what your ‘must have’ features are, as opposed to features that you would like to have but can live without. This will help you to refine your property search, as you can automatically rule out properties that don’t meet your ‘must have’ criteria. If you are purchasing with someone else, be sure to discuss this thoroughly and make one consolidated list so that both parties are on the same page. Your list will of course depend on individual circumstances (e.g. if you have kids, if you are a working professional, your age etc.)

See our example list below, which is based on the lifestyle and requirements of a working professional with children, but no driver’s licence:

MUST HAVES WOULD BE NICE BUT NOT ESSENTIAL
Outdoor area for children / pets Open plan living
Ample storage / wardrobe space Dishwasher
Garage Single level
Study / Working From Home space Ensuite
Walking distance to public transport Freestanding property
Walking distance to parks Island bench in kitchen
Bath 6-star energy rating or higher
Separate laundry Undercover alfresco area

Inspection Game

Attending open for inspections is part and parcel of the property research process. Whilst looking inside other people’s homes, or brand new developments can be exciting, after a while it can also become rather exhausting. So we’ve put together a few tips and tricks to keep you on track:

Plan your attack

  1. Inspect properties that you can realistically afford. It may seem like a fun idea to snoop inside the mansion with the pool, tennis court, and home cinema, but if you can’t afford the place then you’re just wasting time and energy. Stay on task and only look at properties within your price range.
  2. If possible, dedicate a half-day or full day to inspections and see as many houses as you can during that window. Seeing multiple properties in one day is likely to speed up the process of elimination and is a much more effective use of your time, as opposed to inspecting a property every night of the working week.
  3. Write up an open for inspection schedule and visit properties in a geographically logical order where possible to save time and petrol (as opposed to racing back and forth across town).
  4. Treat it like a sporting event. Pack snacks, water, and don’t forget to break it up with a coffee stop here and there.
  5. Take notes. If you are viewing several houses in a short space of time, sometimes they can start to blur into one another. Be sure to take notes on each property you visit.
  6. Ask the real estate agent questions e.g., when was the property built? How many people have been through it? What is the settlement period? Why are the owners selling? How long has it been on the market? Can you provide me with the relevant paperwork to confirm that any renovation work completed was done so with permits, and by a registered builder?
  7. If you are really interested in a property, it may be worth viewing it multiple times – both during the day and at night – to assess things like changes in traffic conditions, street parking, and the kind of light the property receives at different times of the day.
  8. If you are time-poor and/or would prefer to have some added assistance with your property search, you may want to consider hiring a buyer’s agent (also known as a buyer’s advocate). Buyer’s agents are licensed professionals that work on behalf of clients to take the time, effort, and emotion out of the home buying process. They look for suitable properties based on the client’s search criteria and provide informed appraisals of dwellings that make the shortlist. Buyer’s agents can also be used to negotiate the sale of the property, and are sometimes engaged purely for their bidding expertise at auctions.

Outside

  1. Assess the streetscape and neighbouring properties – is there ample street parking? Are the neighbouring properties well kept?
  2. Consider chatting to the neighbours to learn more about the street and local area.
  3. Look at the façade of the house – is it in good condition? Does the property have street appeal and does this matter to you?
  4. If the property has a balcony, courtyard or backyard, is it secure?
  5. Identify nearby shops, parks and facilities, as well as anything that might detract from the property i.e., is it on a busy and potentially dangerous main road?
  6. Check the orientation of the property. North facing properties are said to capture the most direct sunlight throughout the day.

Inside

  1. Once inside, look in all directions – up, down, and sideways to ensure that you are seeing everything from the light fixtures down to the skirting boards.
  2. Check for storage. Assess the size of the wardrobes and find out if there are additional storage options like a linen press.
  3. Turn on taps to check the water pressure.
  4. Open all doors to ensure that they don’t jam.
  5. Don’t be put off by the seller’s furniture and decor, and equally, don’t be seduced by it either. Try to look beyond the styling of the house and concentrate on the property’s layout and whether it is conducive to your lifestyle.
  6. Keep your ‘must have’ list handy and check features off as you go.

The Conveyancer, The Solicitor and The Pest and Building Inspector

Attending open houses, creating ‘must have ‘checklists, and researching properties from dawn until dusk are all things that first home buyers can do themselves. However, there are some elements of the home buying process that can be outsourced to the experts.

Conveyancers and solicitors for instance can be hired to do the heavy lifting for you when it comes to the legal side of things. They are licensed professionals who are responsible for things like examining the contract of sale for any red flags, providing legal advice on the property transaction, preparing and lodging the legal paperwork involved, and overseeing the process of transferring the property out of the vendor’s name and into yours. Both conveyancers and solicitors are qualified to carry out this kind of work, and in most states, you can choose to use either (be sure to check the solicitor / conveyancer rules relating to your specific state).

Another expert that you may consider engaging prior to purchasing a home is a qualified pest and building inspector. Pest inspectors conduct visual inspections of properties for evidence of termite activity / damage and other infestations. Building inspectors assess a property’s condition in terms of safety hazards, minor defects and major defects, and provide a detailed report on their findings. Having these checks completed can help to safeguard prospective buyers against purchasing pest ridden or structurally unstable homes. Whilst these services do come at a cost, they may save you a lot of time, money and heartache in the long run.

Your MoneyQuest finance specialist can explain in greater detail what each of these experts do, and how they may be able to assist you with your property purchase.

Auction Day Dos and Don’ts

Auctions can be emotion fuelled and unpredictable affairs. Some are fast paced and fiery, whereas others can draaaaggg onnnn for what seems like forever with all bidders playing the long game, not moving a muscle for minutes on end. It is easy to get swept up in the adrenaline of auction day, so below are some things to ponder before putting your paddle up:

  • It might be useful to attend a few auctions as an onlooker prior to the one that you plan to bid at. Familiarising yourself with the process and observing how different auctioneers and bidders behave may help you to feel more relaxed come auction day, and equip you with a few different bidding strategies.
  • Each state has different rules and regulations regarding property auctions e.g., some states require you to register for auctions, and others do not. Be sure to read up on the requirements of your state or territory before attending the auction.
  • Arrive slightly early for the auction so that you can walk through the property one final time, secure a prime spot amongst the crowd and mentally prepare yourself. If you arrive flustered at the very last minute, you might not be in the right headspace to execute your bidding plan.
  • Know your price limit and stick to it. It can be quite easy to get carried away in a bidding war, especially if you have become emotionally attached to a property. But if you have done your homework, you will have a fair idea of what the property is worth to you. If you have pre-approval, then you will know what your approximate borrowing capacity is, so always keep that figure (or a smaller figure if you don’t think it’s worth your maximum budget) at the forefront of your mind.
  • Position yourself so that you are in clear view of the auctioneer, to ensure that he or she can see you when you raise your hand / paddle.
  • Auctioneers can sometimes try to play on the emotions of bidders. After all, it is their job to try and get the highest possible price for the vendor. Try to ignore the auctioneer’s theatre and don’t allow them to pressure you into bidding.
  • When you do decide to bid, remain calm and project confidence.

Property Settlement Process

Congratulations! You have purchased a property at auction! Now what?

Generally, immediately after the hammer comes down and the crowd has clapped politely, the buyer and seller are required to sign and exchange copies of the contract of sale and the buyer is required to pay a deposit (usually 10% of the purchase price). The settlement date is agreed upon (listed in the contract of sale) and the settlement period begins (the length of this period varies depending on the vendor and which state the property is in, but it is usually between 30 and 90 days, or 4 to 6 weeks).

Your conveyancer or solicitor will most likely recommend arranging building insurance once you have signed the contract of sale, and it is also a requirement of most lenders. Building insurance is used to help cover the cost of replacing your property in the event that it is destroyed, or to help pay for damage repairs if the physical structure of your property is ever affected. Prior to settlement, you are also able conduct a final inspection of the property to ensure that it is in the same condition as it was on the day it was sold.

A few weeks before the settlement period ends, be sure to chat with your mortgage broker and conveyancer about how much of your own money is needed on settlement day (less deposit, less loan, plus adjustments such as stamp duty, rates, water, and body corporate fees). It is important to ensure that you have sufficient funds available so that settlement doesn’t fall over. Also make sure that you understand how these funds will be transferred (e.g., from a conveyancer’s trust account, or from a bank account associated with your chosen lender). Your mortgage broker can help you to organise all of this so that everything runs smoothly on the big day.

It is also a good idea to ask your broker about loan repayments and how and when they need to be made, so that you can start budgeting for the future. Also be sure to book in a home loan review for 12 months’ time, so that a year down the track you can assess whether or not the home loan you have is still the right product for you.

On settlement day, legal representatives (conveyancers or solicitors) usually finalise the sale on behalf of the buyer and seller. They arrange for the balance of the purchase price to be paid to the seller (usually via a home loan) and the buyer’s legal team ensures that the required property taxes, land transfer duty and rates are also paid. Once the relevant paperwork has been completed and lodged with the titles office and the change of ownership is finalised, the keys are then handed over to the new owner of the property. Cue the champagne!

Our team of finance specialists can guide you through the settlement process step by step and answer any questions you may have. We are here to help make the purchase of your new property as smooth as possible!

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Disclaimer:

This article is written to provide a summary and general overview of the subject matter covered for your information only. Every effort has been made to ensure the information in the article is current, accurate and reliable. This article has been prepared without taking into account your objectives, personal circumstances, financial situation or needs. You should consider whether it is appropriate for your circumstances. You should seek your own independent legal, financial and taxation advice before acting or relying on any of the content contained in the articles and review any relevant Product Disclosure Statement (PDS), Terms and Conditions (T&C) or Financial Services Guide (FSG).

Please consult your financial advisor, solicitor or accountant before acting on information contained in this publication.