Step 1 - Do your research
OWNING property has always been the great Australian dream. Whether you are a first-timer or an experienced homebuyer, you need to ask yourself why you want to buy.
Will you want to live in it or are you buying it as an investment to rent it out and pay it off. Do you want a house or apartment, large or small, townhouse or land to build?
Whatever your answer, the more real estate market research you do, the more likely you are to effectively define your goals and understand what's affordable.
Get onto mailing lists and develop good relationships with real estate agents in the area in which you are looking. Keep in regular contact with them. They can alert you to properties about to come onto the market in your price range.
Step 2 - Work out how much you can afford
Calculate how much you can spend, say one third or less of your pre-tax income in loan repayments. The amount will vary with different lenders, so if you don't get the deal you want from one, try another.
The loan to value ratio (LVR) is the percentage of the purchase price that lenders will agree to lend. Some lenders will insist you have as much as 10 per cent of the purchase price in a deposit.
Don't forget to factor in the following costs: legal fees, loan establishment fees, government charges (stamp duty and GST), property and pest inspection fees, moving costs and building and contents insurance.
First home buyers may be eligible for grants and exemptions on stamp duty (see www.firsthome.gov.au).
Step 3 - Find a lender
Look for your loan at the same time or before you start looking for property.
Do some research online to see who is offering the best mortgage interest rates, then approach them in person to get approval "in principle" for your loan. This means if you need to buy at auction, you have the money organised ahead of time.
Banks, building societies, credit unions, solicitors and mortgage originators all offer home loans. A mortgage broker can help you find the best lender and the best rate for you.
There are many loans on offer, so you will need to do more research to understand the terms: a honeymoon rate offers a cheaper interest rate for the first 12 months; a standard variable rate rises or falls when interest rates rise or fall; fixed rates are fixed for a certain period; a redraw loan means you can pay it off, then reborrow that money - you may have to pay a service charge of say $25 every time you redraw.
Step 4 - The buying process
You've found the property you want to buy and arranged building or pest inspections. They are good, you make an offer, negotiate the price and the final offer is accepted.
Contact your solicitor or conveyancer to do title or body corporate searches, draw up a contract, then arrange to exchange it with the seller.
Once you exchange contracts you are legally bound to go ahead with the purchase. This is also when you pay your deposit of around 10 per cent of the purchase price.
Sign the contract if you and your solicitor are satisfied that everything is in order. Often there are six weeks between exchange and settlement. During this time, you can arrange building and contents insurance on the property, and income protection insurance for yourself.
On the day you are due to settle, before your solicitor passes over the final cheque (or makes the transfer online) you should ask to inspect the property.
You need to check that no damage has been done to it in the intervening period and that all fixtures and fittings that appear in the contract are still in place.
You don't have to settle on the property until all these conditions have been met.
If you would like to know more contact one of our consultants at RateDetective.com.au