Guide to Purchasing your New Home

Anyone one who has done it will tell you, but buying a new home can be one of the most exciting and lifechanging events you will experience. Your new home is likely to be one of the biggest purchases you will ever make. I still remember the first day I walked into my new apartment, it was a tiny little “dog box” as my father called it, but it was mine. There is no denying the elation and pride you get from home ownership.

So how does one go through the rigmarole of buying a home? I didn’t realize how complicated it was until I did it. In the interest of sharing what I have learnt for readers, here is my interpretation of the process of buying a new home. I threw in a few tips along the way.

Step 1: Doing the numbers and Pre-Approval for a Loan

Assuming you have enough for a deposit, make a budget, decide how much you can afford to pay week too week. Don’t over extend yourself, the worst thing you can do while owning a home is run out of cash.

Once you have done your sums, its time to shop for loans. While it may seem like a easy option to stick with the bank you have always been with it , often it can cost you much more. Doing some research here can pay off, some of the bigger banks can charge you a premium for the right to have a loan with them, things like monthly fees add up. Financial Institutions such as Credit Unions and Building Societies can offer some competitive loans.

Having selected who you will be getting your Mortgage with, drop in and get Pre-Approved for a loan. This means they will look at your financial situation and determine how much they can lend too you. You also need to consider how much they will let you borrow without having to take out Lenders Mortgage Insurance (LMI). Which basically means if you don’t have a large enough deposit you will need to pay a tidy extra sum, too insure the provider of your home loan against you defaulting on the loan. 

Step 2: Search for the Home

Getting up early every Saturday morning to drive around to potential new homes can be really fun. Before you get to that stage naturally you need to decide on which suburb you plan to buy in. A lifestyle asset such as your home doesn’t need to be a great investment, however it will ultimately help you out a lot later in life if you ever decide to upgrade.

I once heard… to get a good idea of the market value of properties in a suburb its a good idea to view at least 50 properties similar to what you are looking for. This will put you in a position so that when you do make the offer, you don’t make the mistake of paying way more than you need too, on the contrary you might stumble across a great property which is priced quite cheap!

Step 3: Making the offer

Property offered up for private treaty is where people make an offer on the property which may be accepted or rejected by the Vendor (owner). More often a negotiation will take place with the Real-estate Agent liaising between the Vendor and the potential purchaser. If you are seeing many properties it could be a good idea to put offers on several properties, maybe go a bit low and see if you can get a bargain. Your not obligated to buy the property unless you exchange the “Contract of Sale” with the vendor, however agents are obligated to convey your offer to the vendor.

A good tip is to put your offer in as “Pending of Inspections” this gives you the chance to do Building Inspections and Pest Inspections too see if there is anything majorly wrong with the property, so you don’t end up with buyers remorse! The inspections is really important, my parents recently almost purchased a new home, just before exchanging the Contract of Sale the Building Inspection came back informing them that there was a serious structural fault with the building which would require at least $200,000 to fix! You may have heard stories in the news of people buying properties without doing inspections where they find out its about to collapse under its own weight. If your interested in reading more about Inspections the Department of Fair Trading has some good information about it here.

Buying through an Auction different in that you will need to do the Inspections prior too making your offer. Your offer is made at the Auction through a competitive tender where bidders (if there are any) bid against each-other until the final and highest offer is reached. The Vendor will have a “Reserve Bid” which is basically the lowest price they are willing to accept, which if not reached the property is “Passed in” and the Vendors will negotiate with the highest bidder too see if a acceptable price can be reached. Its important to stay calm at Auctions and not get caught up in the hype and bid more than you planned, just remember when the Hammer falls the deal is done and there is no backing out!

Step 4: The paperwork and Exchange

This part requires a good Solicitor or Conveyancer. It’s a good idea to have figured out who this good legal adviser is before you get to this stage. The reason why this is so important is, while you might like the property it may not include parts or features which you thought where included, for example you might like a house because of the clever Wine Cellar in the basement. However the previous owner might decide they want to take their Wine Cellar with them and have the fittings installed in their new house. Additionally you might inherit the responsibility of a water pipe or driveway to a neighbor’s house including all the costs and risks associated with ownership, these are things that could affect your decision to purchase.

The Solicitor or Conveyancer will review the document called the “Contract of Sale” which specifies the terms of the sale of the property. They will also do other things such as organizing the transfer of funds with the bank and searching whether the Vendor actually owns the property your about to purchase.

Other documentation will also need to be completed, your lender will likely have a mountain of documents for you to sign as well as your Solicitor/Conveyancer. Once all the paperwork is ready and you are satisfied you can give the go ahead to the Solicitor to “Exchange Contracts”. This means you provide the copy of the contract to the solicitor who then provides it to the Vendor’s representative effectively binding you too the purchase of the property after any cooling off periods, if any are specified.

There should be a settlement period of between 1-6 months before you get the keys and do a final inspection and are the official new owner of your new home!

  • Hi there, I am just 18 and I have forever been enthusiastic about getting properties in a early age to ensure I will resell the house with a earnings at a later date. Can anybody know how much cash I need at least to get started on investing in a house? Thank you in advance. 🙂

    • Hi Marjorie

      Most banks will be looking for a deposit of about 5-10% as a minimum. So for a property worth $400,000 that would be a minimum of $20,000 to $40,000 just as a deposit. Often with a low deposit thats only 5-10% banks might make you take out Lenders Mortgage Insurance (LMI) which only covers the bank if you cant pay the loan and doesnt do much for you. LMI can be a big cost so make sure you take that into account.

      With the loan aside its a good idea to have a good solicitor to make sure what you think your buying is actually what you get…Very important! Also its a good idea to consider a getting building inspection (so you know it will still be standing in a years time) and perhapse a pest inspection. All up expect to pay an extra $10,000 at least in costs with buying a house. Although if its not your first house you may have to pay things like stamp duty, which is a another big cost.

      Hope this helps!

      Cheers

      Andrew

Student-Finance.com.au is not a credit provider and does not act as a intermediary between any credit providers. This website does not provide Financial Product Advice or deal in the sale of any financial product. If you require this service it is recommended to seek the help of a professional. You should consider your own specific circumstances before making any Financial decision.