Expert Tips for First Home Buyers

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Start with the basics. What is your budget and don’t forget to add in the costs of buying (solicitors, stamp duty, building and pest inspections, finance application fees, etc)? Where do you want to be? What sort of home do you want (unit, townhouse, house)? Look at what you need and then add what you want.

Pay off bad debt first. Do you have credit cards or personal loans? Not only do these hinder your ability to borrow, they will also kill your cash flow once you get in the new house.

Establish where you can afford to buy by looking at the prices being asked for properties available for sale in different suburbs. This will quickly and efficiently provide you with a target list of suburbs to begin focusing on. The key is to get into the market, pay down your mortgage, and establish equity in your home as a basis for future financial options and flexibility. Once you have gained some equity, you’ll be able to think about upgrading to a suburb you would prefer to live in.

First and foremost — have your ducks lined up. Make sure your finance is approved and you know your budget limitations. Don’t ask for opinions/advice from everyone and anyone. Everyone who has ever bought a property thinks they are a property expert. Find tips from real experts or those who may be experienced investors.

Create a definite list of all of the things your property must have. Take this list with you when searching for homes. It’s easy to get swept away with features and renovations that you don’t really need.

Because this is your first house, limit your risk and exposure so that your first-ever purchase builds your wealth instead of it potentially creating a problem for you down the track. Buy well within your means and inside a suburb where infrastructure is in place and employment is high.

Location is one aspect where it definitely pays to be flexible. If you can’t afford your preferred suburb, consider a neighbouring postcode — it could be poised to benefit from the price growth of surrounding locations, and that can mean great buying opportunities. Where you start your real-estate journey isn’t as important as where you end up.

Once you know which suburbs you’re interested in buying in, take your time to learn more about that area. It is imperative to do your research. What is the median price of homes in that suburb? Does this fall within your range? Is the house close to schools, transport, recreational facilities, shops, etc? Does it meet market demands when it comes to reselling at a later date?Make sure to think of your first home as a stepping stone for your future.

Think about your commute to work, your social network and recreational activities and how close you want to be to these networks. Don’t just focus on the type of property, think carefully about the location. Then jump online and start searching and shortlisting some potential areas and properties.

When searching for your first home, I recommend looking for properties that you have the ability to add value to — even if you don’t plan on renovating for a while. If you invest in a property that you can add value to in the future, you are setting yourself up to be better off financially.

Whether you’re buying a first home or becoming a rentvestor, the key is to do your research. Find out exactly what you can borrow, stick to your budget and never let your emotions get in the way of making a sound decision. Understanding both federal and state grants and duties is also vital, along with surrounding yourself with the right professionals. A mortgage broker who has experience with first-home buyers and conveyancer should be the starting point. Buying your first home is all about taking steps up the ladder to eventually purchase the dream home.

Consider the property’s location — is it close to schools, shops, supermarkets and cafes? Transport — can you walk to a train station, tram or bus stop? Recreation — what leisure and recreation facilities are nearby? Medical — are you near a hospital or medical centre? Ensure you investigate any new developments planned nearby such as roadworks, apartment blocks or shopping centres.

Finance is the first step. Finding out what you can borrow, what incentives are available (e.g. stamp-duty concessions, First Home Owner Grant). Every state is different.

At school not many of us embraced research but now it is your best friend. Research all the suburbs you prefer, prices, liveability, schools, public transport, hospitals, etc., and all the types of houses you like. Then you are in a position to know what suits you and your budget. Use real estate forums to educate yourself. There is loads of information out there; just ask.

Until you know what you can afford, it’s pointless watch-listing properties or trudging around open houses. You need to know your parameters and any areas of your financial record you need to address before you start on the whole home-buying journey. Check whether you are eligible for the First Home Owner Grant. This programme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme, funded by the states and territories and administered under their own legislation. Under the scheme, a one-off grant is payable to first-home owners that satisfy all the eligibility criteria. You need to visit your state’s office of revenue website to check your own eligibility

I suggest first-home buyers get their formal finance pre-approval in place and ready to go — before they even start looking. Then you will know exactly how much you can spend and can negotiate confidently to that level. An extra $10,000 or $20,000 in purchase price can often equate to purchasing a home with an extra bedroom, bathroom, or even a pool. It could make the difference between buying your long-term ‘dream home’ and a home that will do for now.

They need to understand the terminology and process. Everyone has advice, so it is important to find someone they can trust and who genuinely knows the process and the pitfalls.

Over-spending. As a rule of thumb, we say clients should spend no more than 30% of their net income on mortgage repayments. If you are earning $1000 in your bank each week, we would say you can comfortably afford $300 per week in repayments without over-extending yourself. Using the above rule again, if your repayments are less than 30% of your after-tax wage, bump them up to pay your mortgage off faster and save you thousands of dollars in interest.

We’ve often been conditioned to purchase things we love or are drawn to rather than what makes sense. Taking your time to do your research and calculate not only the expenses in initially purchasing the property but holding it as well can save headaches later.

Always give your budget a little stress test. What happens if we have to live on one wage for a time (babies, redundancy, etc.) Also, avoid postcode prejudice. “Oh, we can’t live in X!” Well, guess what? X is your most affordable, sensible option

This probably won’t be your forever home; you’re not looking for perfect. You’re looking for your start. Find the best you can get for your budget and take action!

Agents and private sellers will take you far more seriously when they know you have finance approved. So much so that if the seller were to receive two identical offers and only one has finance approved, then that buyer will likely get the property. In fact, even if your offer is lower (but you are already finance approved and the other person isn’t), then you may still win the property with the lower offer.

Don’t let your property eyes grow wider than what your budget can stomach. To this end, your lender or a mortgage broker can arrange a loan ‘pre-approval’. A loan pre-approval means you have been approved by a lender for a category of mortgage up to a specific amount. Also, don’t fail to invest time in some family planning with your partner before buying a first home. The last thing you want is a three-bedroom house, if a brood of four is on your agenda.

Not understanding the contract. Generally, you take a property ‘as-is’ when buying. If you want the contract to be subject to building and pest inspections, you need to include those terms in the agreement. If you are buying at auction, then it’s worth getting a pre-purchase inspection report up front. It’s a big decision, so don’t rush it and regret it later.

negotiation skills with agents. They over-pay at auctions and private treaties and get buyer’s remorse. Think of your home also like an investment. Avoid main roads if you can and think about who will buy the property after you. Buy in high-demand areas, which means you can sell the property even when the market is in a downturn.

The first time you do anything is a learning experience and buying your first home is no different. The biggest mistake we see first-home buyers make is getting too emotionally invested and not being subjective about what they want to achieve with the purchase. This can lead to overpaying for a property or buying above their budget. Either of those things can make the process a lot more stressful than it needs to be and doesn’t serve them best.

Borrowing too much — first-home buyers can make the mistake of borrowing to their limit. This can mean you are unable to make improvements to your property or, worse, if the unexpected happens, it could mean having to sell your house before you have substantial equity in it.

Don’t be afraid to pay for good advice and expertise. If you find the right advisors, the information they provide will be worth their fee 10 times over. They will remain unemotional and will make sure you keep a level head through the whole process. Secondly, I often see first-home buyers get so caught up in the aesthetics of a house. They will forgo a great house, in a great location, because it has an ugly kitchen or bathroom. I would buy an ugly house in a great location any day. The house you can fix, but the location you can’t.

Not engaging the right experts at the right time. A buyer’s agent provides independent support to source, assess for price and negotiate to buy property. A mortgage broker helps you source the best loan with the best terms and rate. A conveyancer checks contracts for errors before buying a property. A building and pest inspector will check for costly defects in the property before buying. An insurance broker will help you source the best insurance after you have bought the property. Buying property is a complex process. Buyers often come unstuck; not with what they know, but with what they don’t know.

Rushing the process. Do your homework, maximise your spend on your home and work out a wish list. What can the builder do in their packages and what can you do over time to add value to your home? Don’t go crazy spending up big on expensive inclusions that may not add value. For example, a swimming pool may cost you $15,000 but does it add $15,000 worth of value to your new home? Most valuers will tell you cost does not always equal value.

We don’t buy a car without getting a ‘roadworthy inspection’; do the same for the house. This means getting a building or pest inspection done before you make an offer.

Property is our national obsession. Residential real estate accounts for a whopping $7.6 trillion of our nation’s asset classes. When everyone has a property story to tell, everyone has an opinion. But the reality is that the property market dynamic moves like no other. Even experts can be taken by surprise, so it definitely pays to be actively up-to-date in terms of your property market understanding. And we’re not just talking about the snippets you see in the news headlines.

Some agents take advantage of first-home buyers and pressure them into making offers and signing contracts they don’t really understand. Be ready to stand your ground on price — don’t be pressured into a deal you don’t want and, if in doubt, ask your solicitor for confirmation.

With banks now making it increasingly difficult to lend, avoid any lending issues by seeing a mortgage broker before purchasing and getting a pre-approval in place. There are always extra costs that come up when buying a new home, from connecting services to buying new furniture. Make sure you have a buffer built up and put aside so you aren’t going into your new homeowner journey on the back foot.

Previously, if you rented a home , you would have been able to call your property manager to get it fixed on your behalf. It’s always good to have a separate account that you deposit money into each week to cover these unexpected costs.

Knowing down to the last dollar how much it will cost to live in and own the property: mortgage, insurances, council rates, body corps (units etc), general upkeep, etc. Be prepared to adjust your lifestyle: eating out/holidays to Bali/going to the opening of an envelope/buying the latest 4WD may have to be put on the backburner.

Bank fees, valuation fees, building and pest inspections, and legal fees are all other costs of buying that you need to be prepared to pay. Work out your budget before you go shopping, so there are no nasty financial surprises along the way

First-time buyers should be ready and able to act swiftly once they find the perfect home. It’s good to realise that the better the property, the more likely it is that others will be wanting it. By being ready and able to place a deposit down immediately when an offer is accepted, you will get the full attention of both agents and private sellers.

The golden rule of home buying is to thoroughly inspect the property, and that means visiting the home at different times, on different days. The bottom line is, the more you get to know a property before you buy, the less likely you are to discover unexpected surprises after you’ve moved in. Organising a pre-purchase pest and building report will give you the complete picture on the health of a home so that you don’t face unexpected repair bills later on.

Settlement costs such as pro-rata rates, taxes, home insurance and potentially transfer (stamp) duty costs can add up to a substantial amount at settlement. Work out with your broker or bank how much you may need.

Plan your budget and save for a healthy deposit. Make sure your finance approval is still valid before you go bidding at an auction. Before going to auction, make sure you have done your research and fully understand the local property market. You will need to have looked at several comparable sales to understand what each type of property is worth. 

Make sure you have a solicitor on standby, ready to review the contract and special conditions. Before settlement, make sure you have the property adequately insured as the bank will also require a certificate of currency to prove it is insured.

Before you even start the search for a property, speak to a mortgage broker with strong first-home owner experience and they will make sure you have enough funds to complete the purchase, including all costs.

Additional costs on top of the property itself. These can include insurance, moving costs, stamp duty, and inspection reports. Not to mention that most older properties will require repairs and maintenance (sometimes immediately upon moving in).

Make sure you know your purchasing costs before you start and put it all in a spreadsheet. Things like pest and building inspections, conveyancing costs, and any initial maintenance work required. Then there’s removalists costs, costs to have the electricity and phone connected. And don’t forget to set aside some cash for the housewarming party. You will only buy your first home once!

Consider being flexible, including buying a smaller property in the same location or moving to a neighbouring, cheaper suburb to buy the same property type or size. For some buyers it could mean reassessing their options and switching from a home buyer to a ‘rentvesting’ strategy. It’s still possible to invest in the property market with as little as $300,000, so don’t lose hope if you can’t buy your own home. Once a property has been purchased, first-time buyers should also plan for a potential settlement delay, either on their side or the vendor’s side. Banks can often cause these delays.

The most practical advice I can give is make sure you are organised before you apply for a loan. Understand that everything you do is going to come under more scrutiny. It’s not just a simple process anymore. Technology has been a real game changer. People are using less cash, so everything can be tracked when you use your cards. Make an informed decision before you buy, knowing that someone is watching you.

Everyone has a real-estate story. Listen and learn from them. From renters not moving out in time, to services not being connected, to your finance being held up. It all adds to the story of life, so embrace the experience. Listen to all the stories, know that something will probably go wrong and just be prepared.

Lastly, may be well out of your frame of reference for the time being, but thinking ahead 5+ years for school zones is recommended. Otherwise you may find yourselves moving before you want to — remembering that the average time people hold onto a property in Australia is currently 10.3 years. You can find the nearest schools to any property in Australia at on the house.