So, before we deep dive into the course, it is important that you understand the home buying process.
It is important that you understand the process before deep diving into it, right?
Paul cover’s this in our first lesson.
1. Save your deposit
2. Find out how much you can borrow
3. Arrange Pre-Approval
4. Make an offer and buy a property
5. Choose your lender and loan product
6. Sign, exchange, and pay your deposit
7. Cooling-off Period Expires
Note, that if you are intending to purchase at an auction, these steps slightly differ.
Did you know?
Tomato sauce was once sold as medicine. The condiment was prescribed and sold to people suffering from indigestion back in 1834.
Prefer reading? Here is the transcript of the video:
Hello and welcome, this is Paul Pappas from Mortgage Choice. One of the most frequently asked questions that we’re asked, especially from first home buyers is, how can I buy property? What are the steps involved? And what do I need to know? And a lot of the service that we provide our clients is holding your hand through the whole process. Obviously, as a first-time buyer, spending $800,0000 or $900,000 or even over a million dollars of your own money is something that you’ve never done before.
So, we’re here to help you, help you through the whole process, and make it as less daunting as possible and as less fearful as possible. So, what do you need to know? Firstly, you need to know how much of a deposit do you require. And there are a couple of rules here that you need to try and stick with as best possible, and that is that you need to have at least a 5% deposit. In other words, the banks will lend you 95%. So, for the value of the property, you need at least a 5% deposit.
Now, if you don’t qualify for the various first home buyers stamp duty discounts, which unfortunately most of our clients don’t, because of the value of a certain property, you then need to be able to cover stamp duty and other costs, usually about another 4-5% of the value of the property. So, therefore, you need around 10% to get you started. 5% to cover the deposit, and around another 5% to cover the various stamp duty and costs including solicitors and conveyancing fees.
Now if you don’t have that 10%, you might want to start talking to your parents about getting a gift, obtaining assistance from your parents by way of a family guarantor, loan, or assistance in some way, shape, or form. So, the first thing you need to work out is how much money you’re putting towards this, and where’s it coming from. The second thing you need to work out is okay, can you afford the loan repayment?
And we can certainly help you through this process, but there are some pretty basic rules that I’ve had for a number of years now that I’ve had to try and work this out for you, firstly, how much are you saving? Are you saving a regular amount? If so, great. Let’s just assume that’s $1,000 a month, which is fantastic, okay. The second figure you need to know is what are you paying in rent or board or whatever your situation might be.
Now let’s just assume for the purpose of this discussion we’re paying $500 a week in rent, so $2,000 a month in rent, plus the $1,000 that you’re putting towards your savings, means that you can afford a regular loan repayment of $3,000 a month. Now that’s pretty simple back of the envelope stuff, that sticks with your own budget, and keeps your own spending habits consistent as well.
Now, once you’ve determined how much you can put towards this and how much you can afford in terms of a regular repayment, you need to then be in a situation where you can purchase a property and place yourself in a situation that you can purchase a property once the right property is found, and that process is called a pre-approval.
Now, you’ve got to be very careful with pre-approvals, in the sense that, there are lots of banks out there offering or only providing I should say computerised desktop, verbal pre-approvals. In other words, they’re not fully assessed. Now you’ve got to remember, that pre-approval places you in a situation where you can purchase a property, so potentially signing a contract. And if your pre-approval has not been fully assessed, it’s actually quite dangerous.
So the only pre-approval that we will arrange for you is a fully assessed pre-approval, where we’ve gone through your payslips, your bank statements, your credit card statements, verified your total situation to make sure that the banks will lend you the money that you’re looking to spend and borrow I should say to purchase a property and so forth.
So obtaining your pre-approval is very critical to make sure that it’s a fully assessed pre-approval. Once you’ve got your pre-approval, you can then go house hunting, okay. Now I appreciate this is something that we can help you with in terms of selecting the property and so forth, but let’s just say that you found the property that you like, that ticks all your boxes.
Let us know straight away because we can work out with you or give you some reports I should say, that give you an idea how much the property is worth, what it’s sold for in the past, what comparable properties have sold for, if it’s a unit, the value of the recent sales in that block or in the similar area and so forth. So what’s the property worth? We can give you some reports along those lines.
At that point in time, you also might want to engage the services of a solicitor or a conveyancer. Now if you don’t have a solicitor or a conveyancer, we can point you in the right direction in terms of negotiating the contract and so forth. You do need a solicitor to review the contract and negotiate any terms of the contract that aren’t acceptable to you or you would like to include in the contract, okay. So once you’ve got your pre-approval, you can start negotiating and get some legal advice as well.
Before you’ve signed the contract, preferably, you need to choose the lender and choose the product. Now it does depend on whether you’re going private treaty auction in terms of buying the property, but at this stage, we need to start talking about which lender and which product. Now there are different products out there, fixed rates, variable rates, offset accounts redraws, we’ve got a whole heap of other information on videos that we can provide you on that.
We also do regular interest rate updates for you as well. But we need to talk to you at this point in time about which lender, which product, most suits your requirements. So, we can definitely provide that to you. It is preferred that we organise loan approval for you before you sign contracts and so forth, and after you’ve agreed on price, it just depends how the property is being sold whether it’s an auction or a private treaty process.
Once you’ve agreed on price, and done all your preliminary checks and so forth in terms of pest and building reports, strata reports and so forth, engage with your solicitor in terms of negotiating traders on the contract, at that point in time you can sign and exchange and purchase the property. And that’s when you’ve legally purchased the property.
Now auctions are different to private treaties, and I’ll talk about that in a tick. But that’s when you’ve purchased the property, and you take ownership of it and organise your finance accordingly. Cooling off period, now ordinarily, if there is no auction, you get a five or a ten-day cooling-off period and that is preferred in many ways because it allows you to, once you’ve agreed on a price, to get the contract reviewed, negotiate any changes on the contract, do your pest and building report, get your strata inspections done and so forth. So in other words, do all the checks and balances that are required to make sure that the property that you’re purchasing meets exactly what you believe it represents to you and so forth.
If it’s being sold via an auction process, there is no cooling off and that’s law. So everything I’ve just talked about in terms of all your pre-checks and balances have to be done before the auction begins. Because at the drop of the hammer, the property can be yours if you’re the highest bidder and there’s no cooling off by law. So, you’ve just got to be careful with auctions, because there is no cooling off and this is where we need to give you a lot of help and assistance to understand you’ve ticked all your boxes in terms of doing all the prerequisite checks for you, okay.
After you’ve bought the property, usually about six weeks, the property’s yours and that’s what’s called settlement. And that’s when the fun starts, all the celebrations begin, the keys are yours, you move in, move into the house, throw your housewarming parties and so forth. And this is where the fun parts and this is the most exciting part for us, because we’ve been working through you, through this whole process to get you there. And of course, you just achieved your lifetime dream of owning your own home, so congratulations and well done.
So we’re here to help you through this whole process, and give you guidance and so forth. Just holding your hand through the whole process, and giving you that extra bit of service that you simply won’t get from dealing directly with banks. So please talk to us at all at all stages through this whole buying process, and we’re here to help.
Disclaimer: The information provided on this website is for general education purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should consider the appropriateness of the advice to your own situation and needs before taking any action. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy.