Your guide to buying your first property

Buying your first property can both an exciting yet stressful process. We’ve broken the first part of the purchasing process down into 5 steps to help you go in prepared and confident. We’ve also thrown in some tips along the way to help you get the most out of the experience.

Part 1

Step 1: Determine your budget and understand what you can afford

Step 2: Start attending inspections to get a real sense of the market and determine where you want to live and what features you can’t live without

Step 3: Reach out to a lender, discuss your property goals and get a pre-approved loan or ‘loan in principle’

Step 4: once you’ve found a property you’re interested in, prepare to make an offer by completing a number of inspections and reviews on the building

Step 5: Place an offer & get your loan formally approved

Part 2

Step 6 & beyond: Contracts, Paperwork, Cooling off period, Settlement, Move it (more on this is part of the process in another article)

Here are the steps in more detail……….

Step 1: Determine your budget and understand what you can afford

Once you’ve decided buying a property is something you want and likely can do, do some research to determine what you can afford, keeping in mind you’ll need enough for either for the following:

  • 10% deposit (with mortgage insurance or a guarantor) or 20% (without guarantor or mortgage insurance). Mortgage insurance, if required, is a one-off cost added to your home loan and protects the lender if you’re unable to meet your repayments.
  • Ongoing loan repayments,
  • Electricity, water, council & internet bills
  • Insurance (e.g: contents & building – yep the bills just keep coming!) and;
  • Strata fees (if you’re buying an apartment).

You’ll also need to budget for the following costs which come with purchasing a property

  • stamp duty,
  • building and pest inspections,
  • legal costs,
  • Admin & registration fees
  • Strata record inspections (if buying an apartment)

Step 2: Start attending inspections to get a real sense of the market and determine where you want to live and what features you can’t live without

Once you’ve determined what you can afford, it’s a good idea to start attending property inspections in earnest. This is where you’ll start to get a real sense for the market, what properties are really worth, and what features are a must have and which ones you could live without. You’ll likely fall in love with a number of places and miss out on a few too so try not to get emotionally attached to a place until you’ve signed on the dotted line.

Remember don’t rush this process as it is an investment in your future

Key things to look out for during inspections:

  • Cracks on the walls;
  • Way the property is facing – will the property get the morning or afternoon sun?
  • Is there natural light?
  • Signs of mould dampness on the walls
  • That the taps and toilets are working properly and water pressure
  • The title of the property
  • The age and condition of heating and cooling units, hot water service and building
  • Roof integrity if you’re buying a house

In addition to the above, whether you’re looking for your next home or an investment property, it’s a good thing to think long term about the external features that will impact the value and interest in your property down the track. Keep an eye out for these:

  • Is public transport nearby?
  • How far are you from the closest shopping centre?
  • Are there good schools nearby?
  • Are there cafes & parks close by?
  • Is it a safe area for families?
  • What are the neighbours like…if you really like a place, it pays to go to a few inspections and get a sense for the neighbours to ensure you feel safe. Yes neighbours can change but it’s also important to feel safe.

Step 3: Reach out to a lender, discuss your property goals and get a pre-approved loan or ‘loan in principle’

Whilst you’re attending property inspections and getting a better sense for where and what you can afford, it’s a good idea to reach out to a lender and apply for a loan pre approval. It is good to apply for pre-approval (approval in principle) so you’re in a position to put down an offer when you find a place. This can be done through a mortgage broking organisation or bank for example.

Keep in mind, loan pre-approval comes down to the financial institutions’ assessment of your ability to pay back the loan. They consider a number of elements, such as:

  • Income
  • Employment history
  • Credit card rating
  • Living expenses
  • Size of your deposit and loan you’re requesting

Keep in mind that your financial options differ if you’re applying for an owner-occupier loan or investor loan. You need to get really clear on your investment strategy and goals prior to applying for a loan as this can change the loan structure (i.e are you paying off interest only or both principal and interest) and have tax implications.

i.e, do you want to make lower repayments at the start of your loan or would you prefer to pay it off as quickly as possible? Do you want a fixed or variable interest rate? Do you want the flexibility to switch home loan products in the future? Do you want to be able to access the equity in your home? Lots to think about – this is where you need formal advice as it all comes down to your final goal and whether it’s an investment versus or a principal residence purchase.

Step 4: Preparing to make an offer

Once your loan is pre-approved, the real fun begins.

If you find a place your really like and are thinking of making an offer, its best to ensure you do your research on the place before you put in an offer. At the end of the day as the buyer it’s your responsibility to make sure that you know what you’re paying for……

Firstly, get a qualified professional to complete a building inspection to ensure the property is structurally sound and is not going to need major repairs down the track or is infested with termites for example.

Secondly, If you’re purchasing an apartment, you’ll need to review the strata reports  determine how healthy the property is, if there has been any significant damage to the building or apartment over the last couple of years that could repeat itself and leave you heavily out of pocket within a few months of moving in. It’s also good to check the sinking fund to ensure there is a healthy amount sitting there otherwise you could see the quarterly strata levy increase to recoup funds if additional work needs to be done on the building.

You typically pay a fee to review the reports and strata people can be at times quite hard to deal with and very unhelpful. Be stern and work with someone who has done this before so you know what to look for.

Step 5: Placing an offer

If all of the above checks out  and you’re keen to make an offer if it’s a private sale or bid, it’s important to be clear on your absolute maximum; it’s common for buyers to be swept up in the excitement and competition….I know we certainly did…..so having a figure you will not go beyond will ensure you don’t over-commit yourself financially.

If you’re successful in the private sale or auction, this is when your lender will do an assessment based on your property of choice and your current financial situation.

If you’ve out bit the competition and your lender approves the loan, this is when the fun paperwork stuff begins and the property is closer to becoming yours.

Step 6 & beyond: Contracts, Paperwork, Cooling off period, Settlement, Move it (more on this is part of the process in another article)

We will post a separate article to shed some more light on this part of the process as this is where it can get a little more complicated. Many people forget to tell you about all the small nuances of this part of the process so it’s always helpful to get a heads up on the detail of this part so you can go in prepared and less stressed.

This part of the process includes:

  • Signing the contract and other fun legal paperwork
  • Cooling off period
  • Settlement
  • Moving in
The OYSTA Team

The Content Team

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