Step 1: Decide how much you are able (and willing) to contribute First, decide how much you have available to put towards your new property, for a deposit and purchase costs. Your contribution may come from saved funds, investments, gifts, concessions and government grants for which you may be eligible e.g. First Home Owner Grant. You will probably need additional funds available after the purchase is complete to cover moving, decorating, furniture and appliances for your new place. Keep in mind that in most cases lenders require a certain percentage of your contribution to be made up of genuine savings accumulated over a period of time. You may also have equity in another property to use as security for your loan.
Step 2: Find out how much you can borrow If you need to borrow funds to complete the purchase you should know your limit. This is best done through consulting a reputable mortgage broker such as Mortgage Choice, who can check your borrowing capacity across a number of lenders. This also gives you the chance to find out about different type of loans available to you. Many people apply for a loan pre-approval, where a lender assesses how much you can borrow based upon your financial details so you have a better idea of your situation before property hunting.
Step 3: Research the property market Once you know how much you can borrow and how much you have available from your own funds, you can start looking at what’s on the market. Thoroughly research what you can get for your money in different localities by consulting with real estate agents, property advisors, reputable property websites and attending open houses. The more time you spend doing this the better an idea you will have about the market.
Step 4: Find a property you want to buy Hopefully you find a place on the market that you decide is ideal for you. Before proceeding, it’s best to engage a legal adviser (solicitor/conveyancer/settlement agent) who can assist you through the legal aspects of the purchase process. Ask for a copy of the contract of sale from either the seller (vendor) or agent and have your adviser look over it for possible issues. You may also acquire building and pest inspections on the property (in some states/territories this is organised by the seller) to check for serious defects. Note: - WA: Contract is called an ‘Offer and Acceptance’.
Step 5: Make an offer/place a bid If the property is to be sold at auction, you may want to arrange an independent property valuation beforehand to ensure you are aware of the property’s market value. You need to arrange to be able to bid at the auction, either in person or through other means. Knowing the amount of funds you have available (borrowings and your own funds) allows you to bid up to your limit. If it’s a private sale you can negotiate directly with the seller or through their real estate agent and, if you are serious about the purchase, make an offer. In some states/territories this is handed over with a purchase contract signed by the potential buyer. This offer can be accompanied by a deposit (often 0.25% of the offer amount), which shows your commitment. Be aware this is non-fundable in some states/territories after a certain point in time. There may be a degree of haggling if the seller does not accept your first offer, but hopefully you agree on a price.
Step 6: Sign contract/pay the deposit When you purchase at auction, the contract is signed immediately and the deposit paid at that point. A typical deposit is 10% of the purchase price but this varies between sellers and may be negotiated with their agent. If it’s a private sale, once the seller has accepted your offer you need to sign the contract and pay the agreed deposit. When cash isn’t readily available for your deposit, you may use a deposit bond. Your mortgage broker can help with this. It’s often a good idea to obtain loan approval before you sign the purchase contract, or, if this is not possible, have the contract ‘subject to finance’ or with a ‘cooling-off period’, meaning it’s not binding if you are unable to obtain loan approval. After signing the contract, your legal adviser will liaise with the seller’s adviser and the lender to meet and satisfy all the legal requirements. Once complete you should send a copy of the contract of sale to your mortgage broker.
Step 7: Finalise your loan If you haven’t already obtained unconditional loan approval, now is the time. To help the lender decide what loan amount they are prepared to provide against the property, they will often wish to value the property.
Step 8: Settlement Finally, the big day has arrived! The contracts have been signed, the remaining funds are paid over and the property is yours. You are now the owner of your own little piece of Australia!
For a free copy of the step by step guide - with each of the above steps explained in more detail - please contat David today on 0414 259 699