Step-By-Step Guide To Buying A House

Buying a house can be exciting albeit confusing. If you are a first time home buyer, it’s natural to get the jitters. But with proper preparation, you can realize your dream of buying the perfect house.

Preparation for a home purchase in this dynamic real estate landscape, however, entails more than just searching for the perfect property. You will need to understand your finances, know your options, and build a strong team of experts to guide you.

In this guide, we’ll explore the home buying process from start to finish, with practical tips and insights. And whether you’re a first-time buyer or revisiting the process, you’ll learn why each step in the process matters and how you can make a better decision.

1. Make Sure You Are ready

2. Get Your Finances in Order

3. Find Expert Mortgage Broker

4. Choose the right mortgage option

5. Get pre-approved for home loan

6. Find a Real Estate Agent

7. Shop Around for the right Property

8. Make an Offer and Negotiate

9. Get a House Inspection

10. Get a Home Valuation

11. Get a Mortgage Approval

12. Settle and Move In

Step 1 – Make Sure You Are Ready

Buying a house is a big commitment. So, before you even start browsing, you need to be honest with yourself: Are you truly ready? Not just financially but emotionally as well.

You should always think long term and ask yourself:

• Where do you see yourself in 5-10 years?
• Does buying a house fit into that picture?
• Do you have a stable income?
• Are you in a job you won’t be leaving anytime soon?
• Are there any other big expenses in your future?

A sudden job change or a huge new expense can throw a wrench into even the best-laid plans. So, having the emotional regulation to traverse these muddy waters is essential.

In terms of finances, a stable income and a deposit are must-haves. But you also need to factor in closing costs, potential repairs, and maybe even some new furniture. A healthy savings buffer for these miscellaneous expenses will save you a lot of stress down the road.

Step 2 – Get Your Finances In Order

Now that you’ve decided you’re ready, it’s time to figure out those finances. You need to take a deep plunge into your income, savings, expenses, and any existing debts. While this may require time and diligence, it is essential for understanding your borrowing capacity.

Knowing your financial position is the foundation of smart financial planning. In this case, it helps you set a realistic budget for your deposit, monthly mortgage repayments, and all the other costs that come with homeownership.

To get your finances in order, you can:

• Calculate your Debt To Income (DTI) ratio
• Calculate your Credit Score
• Get a rough idea of the current property market
• Look out for first home buyers grant

In addition, you can use our mortgage deposit and repayment calculators to discover what your deposit and repayment would cost.

Step 3 – Find An Expert Mortgage Broker

Trying to understand the world of mortgages can be a hassle, especially without expert guidance. This is where a mortgage broker comes in.

Mortgage brokers can make your home buying process smoother by matching you with the right loan. Since they have access to a wide range of lenders, they can find you one depending on your financial situation. A qualified mortgage broker is valuable, especially if you have a slightly more complex financial situation.

The application process for a mortgage can be confusing. Mortgage brokers take it off your plate and handle all the paperwork. In addition, mortgage brokers negotiate with the banks on your behalf, ensuring you get the best rates. They also help you with the settlement. Choosing a certified mortgage broker with proven expertise, therefore, becomes paramount.

A good mortgage broker will be your advocate, working to get you the right deal. They’re super important in your home-buying journey, as they save you time, money and a whole lot of stress.

Step 4 – Choose The Right Mortgage Option

Figuring out the right home loan product for you can be confusing. There are many complicated terms like ‘fixed’, ‘variable’, and ‘interest-only’.

A mortgage broker can definitely help you understand these terms in detail.

However, let’s take a look at some common home loan types in australia:

• A fixed-rate mortgage means your interest rate stays the same throughout the loan term, giving you predictable monthly payments.
• A variable-rate mortgage, on the other hand, means your interest rate can fluctuate.
• Interest-only loans require you pay only the interest for a set period of time, after which you need to pay both the principal and interest.

So, how do you choose? Well, you need to factor in your circumstance as well as your financial goals.

Here are the kinds of questions you should be asking yourself (and your mortgage broker):

• Which option aligns best with your long-term plans?
• Are you comfortable with a fluctuating variable rate, or do you prefer a stable fixed rate?
• Can you handle potential increases in your monthly payments?

Your mortgage broker will also have you consider the interest rates, repayment terms, and any other fees associated with each option. The flexibility that each option offers is an equally vital factor.

Finally, there are various benefits, such as offset and redraw accounts that may or may not be available with each loan product. One or more of these may be beneficial for your situation.

With some mortgages, you are allowed to make extra payments or refinance down the line, while others might have stricter terms. You can ask your mortgage broker the pros and cons of these different home loan products.

Ultimately, the right choice is the one that fits your financial picture and gives you the peace of mind you need to move forward with confidence.

And if you want to work with expert mortgage brokers to find the perfect mortgage option for you, connect with home loan experts today!

Step 5 – Get Pre-Approval

A Home loan pre-approval (also called a conditional approval) is when a lender has agreed, in principle, to lend you money towards the purchase of your home but hasn’t proceeded to a final approval. A pre-approval will give you a rough idea of how much you can borrow from the bank.

After you’ve chosen your mortgage option, the next step is to get pre-approval for your home loan. Properties, especially good ones, don’t stay in the market for too long. Having pre-approval gives you an advantage, as sellers are more likely to take your offers seriously.

The pre-approval process is simple. It involves a lender reviewing your financial situation to determine your borrowing capacity. They’ll be looking at things like your income, credit history, existing debts, and other financial statements.

There are three key qualifying criteria for pre-approval that banks look at:

• Deposit
• Income and Expenses
• Credit History

To help you prepare, we’ve put together a handy list of pre-approval documents you’ll probably need.

Step 6 – Find A Real-Estate Agent

Once you are pre-approved for a home loan, you can look at property listings that fall under your budget with the help of an agent.

A good real estate agent brings a wealth of knowledge about the local market. They know the neighbourhood, the school districts, recent sales trends, and all other insider information that helps you make an informed decision. Agents also help you pinpoint the right properties based on your needs and budget.

A skilled real-estate agent will help you get a suitable house for your budget, potentially saving you money. You need to look for someone with experience, positive reviews, and a proven track record.

Don’t hesitate to interview a few different agents before making your decision. A good one will listen to your needs, communicate effectively, and be genuinely invested in helping you
find your dream home.

You can search for a real estate agent online on sites like RateMyAgent and realestate.com.au.

Step 7 – Shop Around For The Right Property

Finding the right property to suit both your budget and lifestyle is important. The most critical aspect you’ll need to consider is the location. But the right location can be subjective.

What does a good location mean to you? Proximity to work, good schools, a vibrant community, quiet surroundings? Then there’s the size of the property – how much space do you need? And of course, the price has to align with your pre-approved loan amount.

Don’t forget to consider the condition of the property, too. Are you looking for a move-in-ready house, or are you willing to take on some renovations?

Your real-estate agent will be your best friend during this phase. They have access to listings you might not find on your own and can provide valuable insights into different properties. They’ll also schedule showings and accompany you to open houses.

Your agent, having listened to your requirements, can shine here, using their expertise to filter out the noise and focus on properties that genuinely match your needs.

Online listings are a great starting point, but your agent’s knowledge and network can open doors to opportunities you might otherwise miss.

The property hunt can be exciting. Try to stay organised and focused on your priorities. Don’t be afraid to ask your agent questions and lean on their expertise. They’re there to help you find the right place to call home.

This is a big decision, so take your time, explore the options your real-estate agents provide and then make your decision.

Step 8 – Offer And Negotiation

So, you’ve found a house you want to buy.

Finally, it’s time to make it official, which means you now need to craft a bid and enter negotiations. For this you will need a solicitor and the seller will employ a lawyer.

While putting forward your offer to the seller, make sure you understand the going rate to formulate an offer that’s not too low but also ensure you don’t overpay.

This is where all that market research you did earlier comes in handy. Your initial offer is just the starting point. The seller might accept it, counter it, or reject it altogether.

The seller’s lawyer and your solicitor will now draft paperwork form both sides, after which the fun part begins – negotiations.

You should negotiate on price, closing dates, repairs and other contingencies. Be prepared to be flexible and willing to compromise, but also know your maximum budget beforehand.

Remember that the negotiation process can take weeks, and ensure you reach a mutually agreeable outcome that works for both you and the seller. Once you’ve reached an agreement, it’s time to move on to the next crucial step: the house inspection.

Step 9 – Get A House Inspection

Buying an existing home requires that you get a thorough inspection of the place before you move in. You need to get a professional property assessment to know about its condition.

A comprehensive house inspection covers a wide range of areas, from structural integrity to the plumbing and electrical systems.

Make sure the inspector checks for:

• Roof Leaks
• >Foundation Cracks
• Faulty Wiring
• Appliance Condition
• Landscaping
• Windows and Doors
• Pest Infestation
• Attic and Crawl Space
• Siding and Gutters
• Downspouts

The primary purpose of this inspection is to assess the property’s condition. You don’t have to nitpick every little detail but make sure the inspector identifies any major problems such as roof leaks, foundation cracks, or pest infestation. These are the problems that can affect your decision or require repairs down the line.

When the inspection is complete, get a detailed report of the findings, which will highlight any issue you need to address. You can re-negotiate with the seller if you find any glaring issue during inspection.

Step 10 – Get A Property Valuation

You’ve had the inspection, negotiated repairs, and you now need to determine the fair market value of the property.

For this, a certified appraiser will visit the property and perform a thorough assessment. They take into account factors like size, location, condition, and recent sales of comparable properties in the area. All of these essentially help provide an independent evaluation of the property’s worth.

Now, you may be wondering why this is important?

Well, lenders require a valuation to ensure the loan amount they’re providing is justified by the property’s value. They don’t want to lend more money than the house is worth. The appraisal mitigates the lender’s risks.

Your appraised value can also have an impact on your purchase process. So, if the valuation comes in lower than the agreed-upon purchase price, you may need to renegotiate with the seller or come up with the difference yourself.

Step 11 – Mortgage Approval

The penultimate step in buying a house is securing a mortgage. Once you’ve got the appraisal, you now need to turn to your mortgage broker to finalise the loan terms.

The first item on the list is to lock in your interest rate. You then submit any final documentation that the lender requests.

The lender will review all the conditions of your loan. These conditions might include things like the appraisal value, the inspection results, and your credit score.

Once all conditions are met, the lender will give you final loan approval.

This loan finalisation process can feel a bit like the home stretch of a marathon; it’s the last hurdle before the finish line. You need to stay organised and work closely with your mortgage broker to make sure you complete this step.

Once your mortgage is secured, you’re just one step away from owning your new house!

Step 12 – Settlement

The final step in buying your new house is to transfer the ownership – settlement.

Property settlement is a legal process through which you pay the balance of the share price and ownership passes from the seller to you.

A solicitor or conveyancer manages this process by handling legal documents, co-ordinating with lenders, adjusting rates and taxes, and ensuring a smooth transfer of ownership. The settlement date is agreed upon in the contract of sale, typically 30 to 90 days from the signing of the Contract of Sale.

Settlement entails signing the final paperwork, paying closing costs, and officially transferring ownership of the property.

On settlement day, funds are exchanged, documents are lodged, and ownership is officially transferred. A solicitor ensures all legal and financial obligations are met, minimising risks and delays.

You also need to pay the stamp duty, but you may be eligible for a stamp-duty exemption, depending on your situation.

Move Into Your New House

So, there you have it – a new house to move into! Congratulations if you followed this guide and bought yourself a house.

If you haven’t, and you are still unsure about your mortgage qualification, give us a call on 1300 889 743 or enquire online for free.