Budgeting, home loans, fixtures and furnishing, auctions and inspections, there is so much to consider when you’re buying your ‘dream home’. It can be easy to lose sight of the big picture.
If you’re in the market buying your dream home, it pays to have a plan. Follow these steps and you’ll be able to work out your budget and find the right mortgage to suit your needs. You’ll be signing the papers and picking up the keys in no time.
The simplest way to develop your dream home action plan is to split it into three categories, pre-purchase, purchase and pre-settlement.
1. Pre-purchase Planning
Set a budget
How much are you prepared to pay for your new home? Is there any wiggle room? A contingency you can stretch to should you find the perfect house just outside your budget?
How much have you saved for a deposit and how much is the bank prepared to lend you? How much will your mortgage payments be? Most banks and financial institutions have mortgage calculators that will allow you to determine what your minimum monthly payments would be. Remember, to avoid mortgage stress, it’s a good idea to set your budget so that your mortgage payments are no more than 30 percent of your income.
If you’re a first home buyer you may also be eligible for the first home buyers grant, as well as exempt from stamp duties up to a certain amount. So be sure to include this in your budget calculations.
Don’t forget you will also be subject to additional costs such as a loan application/establishment fees, inspection fees, legal costs, and possibly lenders insurance should you be borrowing more than 80 percent of the value of your new home.
Get your finances in order
With your deposit saved and your budget sorted, it’s time to see your mortgage advisor or financial institution to work out the best home loan to suit your needs.
More info: A plain-English guide to mortgage-speak
At this stage, assuming all your paperwork is in place, you have a steady income and can prove your financial viability, you should be able to get pre-approval (also known as conditional approval) for your home loan.
This means your bank or financial institution will pre-approve you for a loan up to a certain amount for a period of three to six months. This allows you to conduct your search for your dream property secure in the notion that approval for your financing is in place when you need it. This frees you up to make an offer on a property on the spot. This is a distinct advantage in a competitive market, especially when you’re buying your dream home, not an investment property.
Start your search
You’ve done your budget, your pre-approval is in place, now it’s time to begin your search.
Whether you’re looking for a city pad or a rural retreat, there are still a number of universal factors to consider when buying your dream home.
Firstly location: do you research on the neighbourhood you are buying into. Remember you are not simply buying a home but also entering a community. Ensure the local area meets all your criteria. If you’re a young family, schools and local amenities such as sports fields may be important. Someone who is single may have different needs.
Next, determine the type of property you are looking for: house, townhouse, apartment, studio; whether you want to buy land and build your own home or perhaps purchase a new property off the plan.
Also, check for any environmental factors which may impede a resale or raise concerns. For instance, are there capital works planned for the area? Is it in a bush fire or flood zone?
Once you think you’ve found the perfect property, remember to return to it at different times of the day to get a better indication of what it may be like to live there.
2. Purchase plan
You’ve found the one
Now it’s time to secure your dream home! There are two main ways to purchase property: Private treaty or auction.
If a house or unit is for sale by private treaty you will be negotiating directly with the owner or the owner’s agent on the sale. The owner may have a fixed price in mind or be open to offers. If the price is not fixed make sure you have done your homework with regards to recent sales in the area, to ensure you place a reasonable offer. This will increase your chances of your offer being accepted.
You should also do your due diligence on the property by having a building inspection to check for any defects. Properties purchased under private treaty are also subject to a cooling off period so you will have time to recant your offer should there be major issues with the property or if you change your mind.
If you are buying a property at auction, this cooling off period does not apply. You will need to ensure you have completed your inspections and viewed the property at least a few times before jumping in.
It’s also important that your solicitor has viewed the contract of sale prior to you bidding. Auctions can be both exciting and intimidating. It’s very easy to get caught up in the emotion on the day. Be certain to set your price limit beforehand and stick to it! If you are the winning bidder, it’s customary to have the deposit cheque payable immediately after your bid is accepted.
3. Pre-settlement plan
Get your paperwork underway
With the deposit down and the contract signed you are now in the stage of pre-settlement.
Remember that conditional loan approval you got way back in the beginning stage of your search? It’s time to turn that preapproval into a formal loan agreement.
Your lender may require you to take out lender’s mortgage insurance as a condition of your loan if you are borrowing more than 80 percent of a property’s value. You may also need to obtain home insurance.
Is everything compliant?
Once you have exchanged contracts you are in the cooling off period. This is the time to ensure you have crossed all the T’s and dotted the I’s.
If you have yet to do a building inspection, now is the time. You should also have a pest inspection conducted (you don’t want any nasty termite surprises) and check compliance of features such as swimming pool fencing or any extensions.
Check your contract
Finally, get your solicitor to check over the contract to ensure any inclusions are listed and if not, why not? Confirm the terms of settlement – such as the final date to pay the remainder of money owed on the sale and the date you can take possession of the property.
When it’s time to exchange – your lawyer or conveyancer usually picks up the keys for you and provides you with the final documentation for your new home. And voila! You are now a proud home owner. All that’s left to do is move in and start your new life!