If you’ve found your dream home, or you just want to be ready for when the time comes, we’ve created a checklist of things you can do to prepare for your first home purchase.
1. Saving for your home loan deposit
The first step in buying your first home begins long before you start the property buying process: saving a home loan deposit.
How much do you need to buy a home?
In Australia, the minimum deposit required for a home loan is typically 5% of the property value. However, aiming for a 20% deposit is generally recommended. This will help you avoid LMI and get a better interest rate on your loan.
Here are some important things to consider:
Lenders Mortgage Insurance (LMI): If your deposit is less than 20% of the property value, you'll likely need to pay LMI. This protects the lender if you default on your loan. LMI can add a significant cost to your overall borrowing.
Loan to Value Ratio (LVR): LVR is the amount you borrow compared to the value of the property. Most lenders will lend up to 80% of the property value (meaning a 20% deposit). With a smaller deposit, the LVR is higher and lenders consider this riskier.
You might be interested in: Buying your first home with 5% deposit
How much of a deposit will you need to save?
Figure out how much you might need to save to get ready to buy a home.
How can you budget to buy a home?
Here are some ways to budget and save to prepare to buy a home.
Set a goal amount: Determine how much you need for a down payment and closing costs. This will help you stay motivated and focused on your savings goals.
Track your spending: Knowing where your money goes is essential for identifying areas where you can cut back and save more.
Set a realistic budget: Create a budget that allocates your income towards your expenses and savings goals.
Choose a high-yield savings account: A high-yield savings account will help you maximise your returns on your savings.
Set up automatic transfers: Schedule automatic transfers from your checking account to your savings account. This will help you save consistently and reach your goals faster.
Cut back on unnecessary expenses: Identify areas where you can cut back on spending, such as dining out, entertainment or subscriptions.
Increase your income: Look for ways to increase your income, such as getting a side hustle or negotiating a raise.
By following these tips, you can create a solid budget and savings plan to achieve your homeownership goals.
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Can you save on your first home purchase?
Yes, thanks to an array of government grants and schemes, there are many ways you can rack up some savings and drastically reduce the cost of purchasing your first home.
Here are a few national government initiatives that could help you save:
First Home Owner Grant (FHOG)
First Home Super Saver (FHSS) Scheme
Home Guarantee Scheme
Keep in mind that some government first home buyer initiatives are only available locally in each state.
What could your stamp duty costs look like?
Get your home buying budget sorted by figuring out stamp duty costs.
2. Start the home buying process with a home loan expert
If you’re wondering how to start the process of buying your first home, getting support from a mortgage broker is a great place to start.
Purchasing a property can be overwhelming, so having an expert on your side and by your side throughout the entire process can make the experience much more seamless.
A mortgage broker can advise you on what you need when buying a house, how to negotiate purchase prices, guide you through the settlement process and even help you refinance after you’ve settled.
How do you get pre-approved?
A home loan pre-approval is when you receive conditional approval from a lender for the amount you’d like to borrow — before you’ve even found your ideal property. Pre-approval is great if you want to narrow down your search and want to be able to put in an offer with confidence.
You can learn more about the process in our pre-approval guide. Plus, your local Aussie Broker can help you with the paperwork for securing pre-approval.
Figure out your borrowing power
Start your property journey by calculating your borrowing power estimate in a few simple steps.
Should you use a conveyancer or solicitor?
You may be wondering whether a conveyancer or solicitor will serve your needs better in your property journey. While both are qualified to help, there are distinct differences between the two:
Conveyancer
Solicitor
A specialist in property transactions. They handle the legal aspects of transferring ownership, reviewing contracts, and ensuring everything is in order for settlement. They typically won't be able to give broader legal advice beyond property law.
A fully qualified lawyer with a wider range of legal knowledge. They can handle everything a conveyancer does but can also offer advice on other areas like tax implications of buying a property or complex legal issues that might arise during the sale.
Both a conveyancer and solicitor can arrange the property ownership transfer process for you. They’ll review the contract of sale when you’re ready to buy, ensure everything is in order, and help arrange pest and building inspections before you exchange contracts. .
3. Find the right property for you
How do you find the right property and area to buy a property?
While there are plenty of things to consider when you’re thinking about the right property and area to buy in, we’ve broken it down to give you some thought starters below:
Finding the right property
Finding the right area
Consider your needs and wants. Make a list of the features that are important to you in a home, such as the number of bedrooms and bathrooms, the size of the yard, and the availability of a garage.
Consider your lifestyle. Think about how close you want to live to work, school, and other amenities.
Set a budget. Determine how much you can afford to spend on a home, including the purchase price, closing costs, and ongoing expenses such as property taxes and homeowners insurance.
Research the schools. If you have children, you'll want to consider the quality of the schools in the area.
Research the market. Get familiar with the types of properties available in your area and the typical price range.
Consider the commute. If you'll be working in a different city, you'll need to factor in the commute time.
Work with a real estate agent. A real estate agent can help you find properties that meet your needs and negotiate the purchase price.
Look for future development. Consider any planned development projects in the area that could affect the value of your home.
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Where can you find market trends?
If you’ve been shopping around for a home, you’ve probably got a fairly good understanding of what’s going on in your local real estate market. And if you haven’t, it’s worth doing your homework before making your first offer.
Estimated value
Sales and rental history
Property information like the land size, internal size and year built
Dwelling information like the number of bedrooms, bathrooms and car spaces
Other reputable property sites like CoreLogic publish reports and indices that track property price movements across Australia and offer detailed market data and analytics.
Another valuable resource is your local real estate agent or buyers agent. Both will have a good understanding of local market trends and can provide specific insights into your area of interest.
4. Get ready to buy
What are some useful negotiation tips?
Negotiating a purchase can be nerve-racking, but try to cover these basics before you get started:
Know the market and roughly how much the property is worth
Put your offer in writing
Have your pre-approval sorted
Be mentally prepared to walk away if the deal doesn’t work out.
To help get your offer over the line, you might also consider offering the seller a ‘sweetener’, such as a shorter settlement period. You should always check with your solicitor and mortgage broker about the implications of this and ensure that the necessary property inspections have been completed.
What are the different ways to buy?
When you're buying a home there are often two options – private treaty or auction. Each is quite different and has its own pros and cons.
Buying through a private treaty
In a private treaty sale, the seller sets an asking price for their property and negotiates directly with potential buyers through a real estate agent until a mutually agreeable price is reached. There's no bidding war, unlike an auction.
In many cases, most of the negotiation is done between the seller’s real estate agent and the buyer.
Pros
Cons
More negotiation power: You can negotiate the price directly with the seller.
Potentially higher price: Competitive offers might drive the price up.
Subject to conditions: You can include conditions in your offer, like building inspections and finance approval.
Can be a slow process: Negotiations can take time and may not always be successful.
Less stressful: No bidding wars or pressure of the auction environment.
Limited transparency: You might not know how much other buyers are willing to offer.
More time for inspections: Allows for thorough inspections before committing.
Buying through an auction
A property auction is a public event where potential buyers compete by placing bids for a property.
The auctioneer manages the bidding process, and the property is sold to the highest bidder at the end, typically exceeding the reserve price set by the seller.
Pros
Cons
Potentially lower price: Reserve price might be lower than the true market value, and competition can drive the price down.
No negotiation power: Your offer is your bid, and you can't negotiate after the auction.
Transparent process: All bids are public, so you know where you stand.
Unconditional contracts: In some cases, contracts are unconditional, meaning you're locked in even if financing falls through.
Faster process: The sale is final on auction day, subject to any pre-determined conditions.
Stressful environment: Bidding wars can be stressful and lead to emotional decisions.
Risk of overpaying: Bidding wars can drive the price above market value.
Ready to get the process started? You won’t have to do it alone – get in touch with a Loyalty Loans Specialist to find out how you can get one step closer to buying a home.