A step-by-step guide to buying your first home
The process of buying a home can seem gargantuan to most people.
For some, this puts them off the process for years at a time, as they believe that they are unable to satisfy some of the earlier steps in buying a home or feel overwhelmed by the various hurdles they need to jump through to get onto the property market.
However, it is easier to split the process of buying your first home into five different steps. Within each step there may be little nuances that suit your situation, but as a whole all you need to do is follow these five steps to eventually find yourself as a homeowner.
1. Finding financial freedom
There is another word for this: saving. This is where the bulk of your work lies! Unfortunately, the costs of buying a house make it quite hard to enter the property market in some of our major cities.
However, besides investing in property interstate or investing/buying a home in a regional market, the only way of entering the market is to find ways to find as much financial freedom as you possibly can.
This will range from larger savings measures (selling your car if you don’t rely on it, cancelling your credit cards once they are paid off, living off a single income as a couple, buying with a friend, moving home to save on rent, finding extra income) to smaller measures (cutting down on discretionary spending, such as on coffee, alcohol, eating out, entertainment, holidays).
2. Setting a price limit
As part of your savings measures, you will need to establish what your price limit is for buying a home, ie. how far can you go?
A great way to understand how your finances can work for you is by visiting a financial advisor who can look at your current financial situation and suggest ways in which you can get into the property market and to help you structure your finances and savings measures so you are in the strongest position to buy a home.
Creating a monthly budget is the most important part in leading up to this second step of setting your price limit.
Having a monthly budget will allow you to calculate your earnings and savings to see how much capital you will have acquired by a certain point.
3. Finding a loan
Thankfully, finding a suitable home loan is much easier than it once was.
You want to first understand the types of loans available to you, such as fixed rate vs. standard variable rate home loans.
You hear those phrases bandied around all the time, but do you know which one suits your needs?
You then want to come prepared by understanding what a lender expects from you when applying for a home loan, such as payslips, bank statements, letters of employment, etc. and understanding what liabilities might affect your success (ie. how does having a HECS debt affect a loan application?).
Once you have found a home loan that suits your needs and you have spoken with the lender after applying for the home loan, you will be given conditional approval, which typically lasts for a set amount of time and gives you an incentive to find a home as soon as possible.
4. Research potential properties
While not all aspects of buying your first home could be called ‘fun’, there is one part that definitely is: research.
Okay, maybe not everyone loves this aspect, but plenty of Australians are property-obsessed and will browse listings or attend an auction any given Saturday even if they have no intention of buying.
It is important to become a bit of a property expert before you purchase your first home.
This involves drawing on various resources to get a grasp of where the property market is headed in the short, middle and long term.
5. Buying your first home
You are in the final and most exciting stage, and that is bidding for or putting an offer in for a home.
It is important to understand the rules of an auction, as knowing these rules will allow you to best use your toolbelt of strategies for bidding.
If you are successful, you will often be required to supply the deposit immediately and sign the contract of sale alongside the vendor.
For more information, head to realestateview.com.au.