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How to Buy a House: Things First-Time Homebuyers Should Know

24 January 2022 | Investment

Step 1: Are You Ready?

Deciding to buy a house is a huge personal and financial step. A lot goes into it, so it’s crucial for you to be aware of and prepared for everything.

First thing’s first – have you saved enough for a deposit? Your deposit will contribute to determining how much you are eligible to borrow for your mortgage, so having this locked down is a great first step. We will dive deeper into deposits and mortgages later in this article, but having a deposit is a great starting point when you decide to buy a house.

 

Step 2: Evaluate Your Finances

There are a lot of costs involved when buying a house. Your mortgage is probably at the forefront of your mind at the beginning of your journey, as it will determine what you can afford.

A mortgage is a financial responsibility. So before applying, it’s a good idea to consult your accountant or financial advisor to get an idea of where you stand financially.

Consider your lifestyle – things like how much you have saved for a deposit, job security and your income and expenses will affect your ability to repay your mortgage.

Get a copy of your credit file and assess any outstanding debts. Debts are a liability in the eyes of most lenders, so it’s always best to clear them away before applying for a mortgage. Something else to look out for these days is AfterPay. While some people report that their borrowing power wasn’t affected by AfterPay debts, it’s taken on a case-by-case basis, and different lenders will approach it differently.

 

Step 3: Learn the Costs Involved When Buying a House

As we mentioned before, there are a lot of costs associated with buying a house. Whilst the price of the house itself will make up the bulk of total costs, there are additional costs both during the preparation and application phase and after buying your home.

Costs to account for when considering the price of the house itself are the deposit and stamp duty fees.

There are also administration costs such as application fees, legal and conveyancing, finance and insurance costs during the application process.

Fees associated with various inspections such as building and pest inspections should also be accounted for when planning to buy a house.

Don’t forget to budget for the cost of moving (boxes, removalist service/truck etc) as well as the ongoing costs you will incur as a homeowner such as mortgage repayments, council rates and utilities.

You can check out our article on the Costs of Buying a House for more details.

 

Step 4: Mortgages and Interest Rates

If this is your first time buying a home, you may be eligible for one or more grants and concessions offered by the Victorian government. First homeowner grants are available if you’re purchasing a brand new home. If the home you are buying has been lived in before, you may be eligible for a duty exemption. Check out the Victorian State Revenue Office website for more details on first homeowner grants, exemptions and concessions.

 

Before buying your first home, it’s a good idea to shop around to find the best financing option for you. Some things you’ll want to find out are:

  • Interest rate – fixed or variable – variable has more risk, but gains are made when interest rates fall
  • Terms of loan
  • Whether you can redraw
  • Make additional repayments/conditions attached
  • How often interest is calculated

Your bank or loan provider will want to make sure you can pay your loan back and are a low risk to them. If you don’t have a lot in savings to prove serviceability, a couple of options can help. In some cases, your rental history may be able to serve as proof of savings. Otherwise, you could have a parent or someone close to you sign as a guarantor.

 

Step 5: Pre-Approval

Getting pre-approved can help you fast track things when putting in an offer on a house. Pre-approval is a type of conditional approval that you can secure before finding a home. This way, you’ll know what price range you’re looking at during your house hunt.

During the pre-approval process, you provide your bank/lender with your financial information so they can assess how much you are eligible to borrow. This can provide you with a reasonable budget and prevent let-down if the home you want to buy is out of your borrowing range.

 

Step 6: Location & Property

Having an idea of where you want to live is a great starting point. This will help you gauge what types of properties you can afford in the area. You may have an ideal property size in mind. For example, knowing how many bedrooms, bathrooms and living areas your future home will ideally have. When it comes to location and property size, you may need to be flexible to accommodate your budget.

Meadows Property Group manage and sell properties from all over Melbourne. Our property catalogue includes homes from South Yarra, Essendon, Elwood, Toorak and suburbs in between, at a range of price points.

 

Step 7: Find an Agent

A property agent is the best way to find everything you want in a home without compromising too much. Your agent will not only help you find the perfect home but will act on your behalf for all the tough stuff – like negotiating with the seller and background checks.

Meadows Property Group is a full-service agency offering unmatched industry knowledge and expertise that will bring you the best possible buying experience. Our team can show you listings available in the area and answer all your questions about the property, how the market is performing, and any other general queries you have.

 

Step 8: Inspections

With all the paperwork out of the way, you’re probably itching to start viewing and inspecting potential homes. However, when conducting inspections, there are a few important things you’ll want to keep in mind. Check out our post on What to Look For When Buying a House for details on things to keep an eye out for when inspecting properties.