There is nothing worse than heading out on your holiday and suddenly realising you forgot something. It’s a jolt that can throw off your whole vibe and send you scrambling for a quick fix. Like forgetting to book your pet into the pet hotel, arriving at the airport and finding you didn’t book your baby on the plane...the one you are carrying. Or taking the car keys with you, when the car is with the valet (thank you keyless ignition!)
While these little hiccups can make funny anecdotes, they can be avoided with careful planning and having a checklist mapped out well in advance.
But we aren’t talking fun little holidays here, oh no, the stakes are much higher when you are buying a home. Just like a holiday, there are plenty of moving parts in the planning phase, selection process and purchase, and you’ll have less experience to draw on to see you through.
Technically even primary school camps give you some real-life preparation for going on holiday. There are no gentle introductions to buying your first home, this is a real-world, real-time experience that you can’t afford to mess up.
The trick to getting to the end of your property purchase smoothly is to cover as many bases as possible in advance, so you don’t find out what you missed the hard way.
So many first home buyers put the cart before the horse, they fall in love with a property (after all, hunting for houses is the fun part) then try to get their finances and paperwork in order.
You need to do the finances first. It’s boring, maybe even confronting, but knowing where you stand financially, what the costs will be and how far you are from your target is something you need to know well before you plan to buy.
I’ll give it to you straight: Buying a home takes a lot of time and patience. Start planning long before you start looking so that when the right property is available, you are set and ready for action.
We’ve put together a list of the essentials you need to cover before you get your heart set on a home. Move through this checklist in the right order and give yourself plenty of time to get everything sorted at each step before moving on.
I get it, it’s hard to get excited and motivated about sitting with lenders and filling in paperwork, talking about fees and calculating repayments. The fun and motivating stuff is looking through real estate magazines, browsing homes online and walking through your potential new property.
There is no way around it. You need to get the financial paperwork completed before you go property hunting.
Preferably talk to more than one potential lender to see what different options and packages they offer. There is a lot to take in so you might need multiple visits to work through all the pieces. Take the time to understand the jargon, like fixed and variable interest rates and comparative rates so you know how to read the offers presented to you.
Before you go into your meetings have your income, expenditure, saving and loan history fully catalogued and ready for inspection. If you are splitting your home loan with your partner or another person, everyone on the title will need to present their finances. Most lenders will ask for at least a six-month financial history.
It’s important to have a clean and well-organised filing system, both online and hard copy so you can keep everything together, easy to access and available when needed. Having checklists of what is required for each provider can also help you keep track of your progress and remind you where you still need to fill in the blanks.
Some of the documents to include are:
• Tax returns
• Birth certificates
• Driver’s license copies
• Bank statements
• Loan agreements
You may need to get copies of these documents certified which can be time-consuming. And may require appointments, even payments to achieve. These are not the kind of fiddly, stressful jobs you want to handle while negotiating terms on a property sale. Get it done months beforehand.
By law, a lender will need to discuss risks with you, take these seriously. What will happen if interest rates rise by 2% in four years time….what will your repayments look like then?
At this stage you should have your deposit already set aside in a savings account, the more you have saved, the better. If you have a guarantee on your application they will need to present their identification and show that they are financially capable of stepping in if needed.
Saving for your deposit will give lenders some faith in your ability to handle a mortgage and stay committed to your goal of owning your own home.
Make sure you understand the whole cost of your loan, including admin fees and ongoing fees. There will be different fees and conditions applied to a huge range of ‘extras’ so it’s important to understand all of them, especially as they will vary considerably depending on your deposit amounts and will influence add ons like lender's insurance.
In your meetings, go over multiple situations you may face over the term of the loan, including what the fees will be if you sell the home and pay it out early.
In your meetings ask questions about your limits, turnaround times and access to finances so you know what to expect from your lender when it comes to making an offer on a property. When you have your home loan pre-approved you know exactly how much you can borrow and how fast you can access the funds, it gives you incredible power and confidence when making an offer on your first home. It shows a real estate agent and vendor you are serious, capable and committed to buy.
What if my loan is knocked back?
If your home loan is not approved, ask what you need to achieve in order to qualify. You might need to show six months of hard saving, where your expenditure is significantly reduced in order to prove you have the ability to commit to repayments and interest.
What can you get back?
At this point, you’ll also be looking to see what incentives and offers are available to you and be sure you understand the terms and conditions of things like the first homeowners grant, builder’s grants and any discounts on house and land package deals.
There is a truckload of paperwork you need to complete so be prepared to dig up documents and get everything in order. Download the paperwork and read over it carefully so you know what is required and what you need to gather to prove your eligibility. Don’t assume anything or hold onto any doubts, pick up the phone or send email enquiries through on your questions, and do it early so you can get responses back even with slow turn-around times.
A conveyancer is someone you can objectively discuss your property goals with. They can help with legal aspects around different property types, for instance, what type of property you should avoid if you are making a tree change. Not all properties come with the ability to build, you might be stuck with an expensive sheep paddock!
A conveyancer is an essential legal overseer in completing your property settlement and transfer. You don’t need to wait until after you have signed the contract to find one, actually, we recommend getting your conveyancer on board before you go property hunting.
A conveyancer will also look over the property terms and conditions before you sign to help you understand the legal jargon there. They can spot anything unusual and bring it to your attention and rally for changes that will better align with your property goals
Once the contract is signed that’s it. There is no negotiation or ability to make changes. Get your contract checked by a legal professional before you sign and commit your deposit.
Yes, it’s finances again. I know, you want to talk about the house, but this is an investment, so while the house is the goal, money is what you are dealing with, so let’s get it over and done with so you can get going on the fun stuff, stress-free!
While the property purchase itself is the biggest part of the costs, it’s not going to be paid upfront. Take the time to catalogue your immediate costs ahead.
Have a running sheet that details all your possible home buying expenses and tally where you are at to date. Aside from the property purchase, there are a lot of other service providers you will need to engage to get through your property purchase smoothly. Be aware of your upfront costs and make them a priority in your budget.
These include but are not limited to:
• Government transfer fee
• Mortgage registration fee
• Stamp duty (land tax)
• Bank mortgage application fees
• Lender’s mortgage insurance
• Conveyancer fees
• Pre-purchase building and pest inspections
• Council rates
• Moving costs
• Property Insurance
• Gas and electricity connections
These can be easily overlooked expenses will be paid at the time of purchase so they will be a priority in terms of your expenses. Know what they will be and know what you can afford so you can find ways to make it work to your budget.
Make sure all your quotes from service providers are in writing and keep a handy record of these as well as the contact names and numbers so you can get in touch quickly when needed.
When it comes to connecting gas and electricity it can be time-consuming and expensive to reconnect once the power has been shut off. Talk to a provider about what options are available to you for avoiding connection fees after the current property owner has closed their account.
Remember too that some of these upfront costs may have to be paid even if the property you put in an offer for doesn't pan out. Include some false starts or delayed settlement times in your budget so you have enough money saved to allow for more than one property offer, just in case.
A really big trap first home buyers can fall into is going straight from a walk-through to an offer. There can be a real sense of urgency to make that property yours once you know you like it. See it, buy it….wait, let’s slow down, no one expects it to be that instant.
On an investment this big, you need to slow down and understand the big picture of your purchase.
It’s a myth that letting the agent know you are interested works against you. The real estate agent has a wealth of information you need to make a good buying decision. Even if you know you love a property, you still need to fully understand what it’s worth and what the terms of sale are.
After the open, book a time to visit the agent representing the property in their office and speak with them about your interest to buy. Opens are usually in the evening so you can go into the office the next morning. Treat it like an interview and ask questions about the property history, expected price, about the reason for sale and ask to see a copy of the sale contract. A copy of the sale contract is available to you, even without making an offer. Send this through to your conveyancer.
By this stage you should have researched recent property sales in the area to know what the going rate is on this property type. If the offer is over, or under, ask about the reasons for the difference.
This meeting is a great way for the representing property agent to get to know you and see that you are financially organised, committed and ready to go (of course you are, you followed steps one and two!).
Once you have looked over the bigger picture, you are confident that the contract is fair, your lender agrees that the property value is correct, THEN you can make a fair offer in writing or a testing offer by email.
Talk to your conveyancer and the real estate agent about how to make a legal offer on the property.
A great thing to add in your offer conditions is ‘pending third party checks’. You’ll also want to book these checks in as soon as you are ready to make an offer.
As soon as your offer is placed and before you’ve paid any deposits or signed any contracts, it’s essential to get your third party pre-purchase inspections completed. You can opt to complete the checks before you have made an offer, however, because they can be expensive most people want to know they are being considered for the purchase before they make that financial commitment.
Luckily third party checks can usually be done pretty quickly. If you are super prepared you will have contacted local inspection agents long before your property searches to ask about their services, price and turnaround times.
Knowing which companies you want to work with in advance means you can get moving quickly when you are ready to put down a deposit.
Your lending agent might also need a copy of inspection reports, or they may have conditions where they send out their own representative, so be sure you know about these terms so you can follow through on anything they need as part of your home loan approval.
The two main checks to do are
1. Pre-purchase building inspection
2. Pest inspection
Have these costs factored into your budget well in advance.
Never skip third party checks. Getting a clean bill of health means peace of mind and no nasty surprises. If there are any issues, you can re-negotiate your offer to reflect the costs you will absorb, or talk with your conveyancer about having these issues repaired before settlement. If the work ahead is too much for you to handle, opt out and keep searching.
Third-party inspection turnaround times can be quicker than you think. In most cases reports are provided by email within 24 hours of inspection. Finding your provider ahead of time is key to a fast turn-around.
If you have already discussed your interest with your real estate agent and/or made an offer on the property it takes the pressure off about the added time these inspections will take.
Some building inspections will also be able to check for termites and termite damage, however, it is also usual for pest inspections to be completed by a separate company, so make sure you know what is covered so you can allocate the right companies to carry out work.
What issues can a pre-purchase inspection detect?
• Water damage
• Drainage issues
• Structural and foundation issues
• Roofing issues
• Repairs required
• Windows and door functionality
• Potential for plumbing and electrical issues
What issues can a pest inspection detect?
• Termite damage
For pest inspections, the biggest factor is termites and termite damage as the damage from termites can be extremely costly and is hard to detect without specialised equipment.
Please be careful when getting quotes for these checks. A cheaper maintenance pest control test is not the same as a pre-purchase pest inspection, the cost is significantly higher as the report is more detailed. Be sure you get a local quote that will cover what you need: pre-purchase inspections.
From here out leave it with the professionals. Your conveyancer will be in touch letting you know the status of your application and anything you are required to do. They will be able to monitor your settlement progress in real time online and see all communications with the vendor’s representatives and your lender for a smooth and efficient transaction.
Always contact your conveyancer directly before making any money exchange for the deposit. Never trust an email, no matter how genuine it looks. You want to be sure the bank account details are correct and they have personally requested an exchange. Scams are big in this part of the property industry, as there is a lot of money changing hands and a lot of excited emotion and nerves about securing the purchase. Go slow, take your time and check the details before you make any transaction.
While you wait for settlement there are plenty of tasks you can undertake to keep you on track to your property goal:
• Keep saving, you still have expenses to come!
• Take out homeowners insurance for the property
• Arrange with the agent for a pre- settlement inspection (usually done in the week before settlement)
• Organise your move
• Pack and declutter
• Prepare your rental to get your bond back
• Update your will to include your investment and what will happen should you pass away
If you have kids, talk to schools, daycare or kindergartens in the area about enrollments and start the paperwork
When it comes to insurance, check the details on who is responsible for the property during the settlement period. In almost all cases the vendor is responsible for the property until the moment of settlement.
Take out homeowners insurance for the property, starting on settlement day.
Check to make sure this is the case for your property and take out your insurance ahead of time, with a start date for settlement day. While you are there, check to see what the contents insurance terms are so that you can be sure that your furniture and goods will be insured for the move. If not, you might want to think about extra insurance for your move.
Emotion is the biggest factor when it comes to first home owner mistakes. Especially the fear of missing out (FOMO). Fear is a super stresser that can lead to poor decision making and can have first time home owners skipping over essential steps with costly mistakes and long delays. Worse, it crushes your confidence, making it hard to re-group and get back out there.
Here’s something I want you to keep in mind to stop the FOMO from getting the better of you; there will be another property for you. New homes come on the market every day.
Leave fear at the door and get organised. Move forward carefully, do your research, ask for professional opinion (please note: your parents are not professionals, unless they are property specialists) and do the work. I promise that the feeling of owning the right home, the right way is even better than a fabulous holiday!
Contact us today if you would like one of the best NSW conveyancers to walk you through your property transaction.
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