Ever gone on a really long road trip? You know that when you first set out, you’re wondering what time it will be when you arrive at your destination, or if the photos will match the Air BnB description, and how on earth you’re going to get through the next few hours of playing eye spy.
It’s just like buying your first home, when you think about it. There’s the home ownership jargon to decipher, learning how much you need for a home loan deposit, getting approved for a mortgage, not to mention the settlement period.
But what’s a road trip without a pit stop? There’s a reason the Roads and Maritime Service came up with the campaign, “Stop, revive, survive.” It’s so that we break up our marathon drives into bite-sized chunks, so that we make it to our end destination safely.
Looking to buy your first home? I want you to think about buying your first home as a series of pit stops, and a series of goals rather than one grand mission. And if you stack your goals according to a plan, you’ll make your journey to home ownership a whole lot easier.
In fact, a field experiment testing dietary changes found that you’re 2-3 times more likely to stick to your goals if you make a specific plan for when and how you’ll reach these goals.
This finding – that planned behaviour has a tremendous outcome – has been repeated across hundreds of studies and has been found to increase the odds that people will start exercising, begin recycling, stick with studying, and even stop smoking.
And today, we’re going to apply this proven method to buying a home in Sydney.
How to buy a house in 7 steps
There’s no set time frame for these 7 steps, because everyone’s financial situation is unique. But it does help to have a timeline, as I commonly see couples dragging out the process for years, rather than just months.
Step 1: Goal setting with purpose
Get out your planners, pens and highlighters – it’s time to start planning. Sit down with your partner, or whoever you plan on buying a home with, and determine your financial situation. You’ll need to get clear on:
- Your existing debts. How much do you owe?
- Your savings. Will this cover the cost of a home loan deposit?
- Your credit score. Have you checked your rating?
- Repayments. Can you afford to service a home loan each month?
- Your budget. Have you been successful in sticking to your current budget? If not, where can you cut back on costs?
Step 2: Time to shop for a mortgage
After you’re clear on your credit score, savings, debts and budget, it’s time to visit your mortgage broker. Shopping around at the banks is an option. But if you want a variety of options from a number of lenders, a reliable mortgage broker will be your sage guide into the world of home loan shopping. They have access to a wide range of home loans on the market, and will know what you need to look out for.
I know what you’re thinking – it’s just another cost you don’t need. Here’s the thing: most people are surprised that they don’t have to pay an extra fee for a mortgage broker. Yes, really! After all, if you want the best advice from an expert, you generally pay through the nose, correct?
Mortgage brokers typically get paid a commission by the lender after the finance is settled. As a house hunter, you’ll never actually see or pay this bill. You get all of the benefit, without the cost.
This also encourages your broker to go above and beyond. Because if they don’t help you get approved for a loan, they won’t get paid.
Along with finding the right loan for you, a mortgage broker also saves you time and energy doing the ring-around, applying for loans that you might get knocked back for. Consider us your personal shopper. If you’re new to mortgages, you honestly can’t afford to not use one.
As I always say on this blog, knowledge is power. Make sure you keep an eye on interest rates too, and speak to your friends about their experiences with mortgages. The more you know, the more equipped you’ll be to find and buy your dream home, without unnecessary hiccups.
Step 3: Mortgage pre-approval = your home buying head start
Once you and your mortgage broker have found the right loan for you, you can speak with your mortgage broker about getting pre-approval even before you’ve found your dream home.
This is where you loan limit is approved for a period of time, giving you the opportunity to fast track the home buying process.
Often, people find their dream home, only to discover they’re not illegible for a home loan. Or they can’t find the right one for them. Get pre-approved, and you’ll have the freedom to make an offer on a property with the safety of assured finance. You’ll also have a better shot at short-listing properties within your budget, rather than wasting time looking at properties outside of your budget.
All pros, and no cons.
Step 4: Get to know the market
Now’s the fun part where you get to explore your city. Check out the posts below for our advice on buying within Sydney suburbs.
When doing your groundwork, you’ll need to find out:
- The median house price for those areas;
- Transport and accessibility;
- Lifestyle factors and what suits your needs;
Make a check list of priorities, and decide on non-negotiable and those less important nice-to-haves.
Step 5: Attend Inspections
Once you’ve found an area you’d like to live in, it’s time to attend open inspections. But whatever you do, don’t jump at the first property you like.
An easy way to find out about property inspections is by subscribing to websites like realestate.com.au and domain.com.au, which will alert you when a new property is registered. On Thursdays and Fridays, open inspection times for the weekend are published.
The question is: how many properties should you see? You could take the enthusiastic route and attend 50 in a few weeks. But if you’ve done your research and know the market well, you’ll know which properties are worth pursuing and which are not right for you.
Step 6: Pre-purchase inspection
At long last, you’ve found the home you want and you’re just about ready to run through the door, leaving a bugs bunny imprint behind you.
But not so fast, homebuyer. You wouldn’t buy a car without a full inspection, and the same rule applies here. Engage a professional to perform an inspection for you, as they’ll do a thorough job of spotting rising damp, mould, termites or any other faults. Do not attempt to DIY your own inspection! If your inspector finds a fault, you can negotiate on price, or you have the option of moving on to the next potential property.
In the best-case scenario, your home is ready for you to move in.
Step 7: Make an offer
It’s go time. How do you make an offer on a home? While we have an entire post here on negotiation tips for first homebuyers, a general rule is to make an offer within 5% of the asking price. If you’re unsure how to negotiate, you can always hire a buyer’s agent to do the legwork for you. You’ll also need a conveyancer or solicitor, who’ll ensure that the contract between you and the vendor includes any special conditions you require, has a cooling-off period, and outlines the terms for settlement.
When it comes to buying a home, approach it with the mind of a business person with a solid strategy. If you have a blueprint for what will happen and when, you’re more likely to see your goals to fruition much sooner. I know the heart ache of seeing couples unable to find a home they like for years, so I can’t stress the importance of thoughtful planning enough.
Think you’re ready to go loan shopping? I can help you get through these steps with honest, genuine advice. Why not get in touch? I’m only a call away.