Things to consider when buying a house
Your home buying guide checklist
Buying your first home is of course one of the biggest life decisions you’ll ever make, and there are many things you need to take into account before taking the plunge. Your friendly ITP Home Loans advisor is happy to help you decide whether you’re ready, as well as getting you the home loan deal and helping you through the loan application process if the answer is ‘yes’. So here are some important factors to consider when buying a house or an apartment:
Are you ready financially?
If you’re a regular saver, and you’ve managed to save at least 10% of your deposit, the answer may be ‘yes’. If you’ve got a bit over for contingencies, even better. However, 10 – 20% of the purchase price of most homes today is a large amount for you to save. ITP can discuss a couple of low deposit options with you, including a guarantor loan.
These types of loans come with conditions attached, but most lenders will want to see evidence that you’ve saved at least some money – usually around 5% of the purchase price. And also that any gifts of money from parents and other relatives aren’t required to be paid back.
If you’re trying to save it’s a good idea to put regular amounts into a dedicated high interest savings account.
Are your buying expectations realistic?
There’s a good chance you may not be able to buy into your ideal area, especially if it’s your first home. Think about moving into a location you may not be familiar with, where you’ll get better value for your money, such as an outer suburban area. Other suggestions include:
- Compromising with an apartment rather than a house, or buying a smaller house that you may be able to add to later on.
- Buying an unrenovated house that’s structurally sound. A new coat of paint works wonders, and you can make renovations further down the track.
- Buying an investment property to secure a rung on the real estate ladder. You can use the rent to pay off your loan, and hopefully sell the property for a profit after a few years, using the proceeds as a deposit for your own home.
Have you got home loan pre-approval?
A loan pre-approval is one of the most valuable tools you can have in the property buying game. Getting your finances sorted before you find the right home:
- Lets you know exactly what your upper purchase limit is. You won’t waste time looking at, or making offers on, properties you can’t afford.
- You won’t have hassles about finance once you’ve found your dream home – you can concentrate on securing it.
- You’ll be able to confidently make an offer below the listed price, or make a pre-auction bid.
- You’ll be able to move quickly if you want to make an offer – there’s less chance of being gazumped.
- Written pre-approval on your loan is vital before bidding at auction, as there’s no going back on the sale once you’re the winning bidder.
Nearly all pre-approvals are subject to a proper valuation of your intended property – it’s wise to get this done before entering into a contract or buying at auction. Pre-approvals usually last for 3 months, and are only valid if your situation stays the same, E.g. your employment status. Lastly, your pre-approved finance needs to be a formal, written one, not simply a quick indication from a lender as to your loan limit. Your professional ITP Home Loans advisor can sort through all these factors with you, to ensure you get full home loan pre-approval.
Buying through private treaty?
A private treaty sale occurs when you make an offer to the agent, who then manages your negotiations with the owner. Once a price has been agreed on:
- Contracts are exchanged and signed, and you pay your deposit. It’s highly advisable to get legal representation when buying a home. He or she can go through the contract before signing and make sure the conditions, including the fixtures and fittings of the property, are all sorted.
There’s usually a cooling-off period, when you’re entitled to change your mind about the purchase. The seller may be allowed to take a small fee from your deposit if this occurs.
Considering buying at auction?
Auctions can seem pretty daunting at first, so it’s wise to go to a number of them before you actually make a proper bid. And if you attend the open houses before these auctions, so much the better. You’ll start to get an idea of expected prices versus what the properties actually fetch.
Here are some pre-auction ‘musts’:
- If you’re serious about a property, get a contract from the real estate agent and have your legal representative (and you yourself) look it over and approve it. You’ll be signing a binding contract of sale at the auction if you’re the successful bidder.
- Get vital checks – building and pest inspections – of the property carried out before the auction. Once the property’s yours, there’s no recourse on any problems it may have.
- Have your written loan pre-approval and of course your deposit (usually 10% of the price) ready beforehand.
- You’re required by law to register before you bid at an auction. Your driver’s licence is sufficient formal identification.
Some tips on bidding:
- Bidding usually starts in $10,000 increases. You can bid at any time, slowing things down by offering only $5,000. Go right down to $500 or even less in the end stage if you like.
- Don’t go over your limit! It often helps to have an auction-experienced friend accompany you for support.
- If the bidding doesn’t get to the reserve price (the owner’s pre-agreed lowest selling price) the property is passed in. Usually the highest bidder then negotiates with the agent and the owner. Even if you’re not the highest bidder, you can still register your interest with the agent.
If you’re the successful bidder: Congratulations!
- You sign the contract and pay your deposit there on the day.
- Unlike a private treaty sale, there’s no cooling off period with an auction.
After signing the contract you’re committed to the purchase. If you don’t carry through with it, you lose your deposit. You may also be liable for other related costs.
Steps to settlement
After exchange of contracts, there is a settlement period of usually six weeks, though this can be different if the buyer and seller agree. During this time you should:
- Organise your purchase balance
- Sign the finance documents
- Take out insurance on the property
Your mortgage broker should facilitate all this for you. Your lender will also organise a valuation of the property, and, unless you’re buying a strata property, get you to take out building insurance. Stamp duty is due at settlement.
From your first consultation, to organising finance, handling the paperwork and dealing with any problems, your ITP Home loans broker can handle all the nitty gritty of your home purchase expertly, efficiently and with a friendly smile. So if you’re thinking of getting into the property market, don’t hesitate to email us, or make an appointment to see an advisor face to face. Alternatively, give our ITP Home Loans consultants a call today on 1300 387 487.