Deciding on a property purchase is one of the most life-changing, and even daunting, decisions of your life. That’s why a first home buyer’s guide is so important.
There are also so many factors to carefully consider. Whether you’re making wise investments for your real estate portfolio, or you’re a first home buyer, don’t underestimate the homeowner process without doing your due diligence first.
And that entails a lot of research, research, and more research!
First Home Buyer’s Guide for Western Australia
For this reason, we’ve put together a home buyer’s guide to help you navigate through buying a home. From looking for the perfect location to suit your needs to getting pre-approval and moving in.
#1 Evaluating the budget and finances
How much you can borrow from the bank depends on a multitude of factors. Mortgages are a big financial responsibility, after all. You need to get a good idea of where you stand, and it’s best to have honest conversations with an accountant to help you figure out what you can and can’t afford. Being knowledgeable of this can help you when you start searching for property.
Apply for copies of your credit file, and make sure you’ve cleared away debts. But if you have bad credit, perhaps it’s not the best time for you to purchase a home or any investment property.
If you have multiple credit cards and loans to pay off, minimize them as much as possible. Reduce the limit on your cards. This can help you secure a larger finance amount.
#2 Investigate interest rates and mortgages
Do you have your deposit ready? Then those are bonus points. However, you still need to shop around to find the right financing options for you. Make sure you understand all the terms of the agreement. Do your best to learn:
- Terms of the loan (usually lasts from 25-30 years).
- Interest rates.
- Whether or not you can redraw funds.
- If you can make additional repayments.
- How often the interest is calculated.
If you don’t have deposits saved, full-finance of the purchase price may be a good option by using your renting history as proof of savings. However, without equity, there are more risks associated and you’ll be required to have full insurance.
You have two options for interest rates: fixed and variable. A financial advisor can help you decide which of the two will suit you best. There are benefits to both.
#3 Know the cost of buying a house
It pays and is worth it to seek advice from a financial advisor, accountant, or lender, so you can get the scope of the full costs connected to buying a home. A list of costs likely to incur:
- Legal and conveyancing fees: Depending on the amount of legal work that’s required for conveyancing and other legal cheques, put aside $1,000 – $3,000.
- Insurance & finance costs: If you’re borrowing more than 80% of the purchase price, you’ll need to pay LMI to protect the lender if you fail to make your repayments. There also might be fees for valuations, settlements, and applications. Mortgage applications can cost from $200-$600, depending on the lender.
- Stamp duty: Stamp duty tax you pay depends on the state you live in. It’s applied on the purchase value of a property.
- Deposit: You need to come up with a 10-20% deposit to secure home loans in order to avoid paying Lender’s Mortgage Insurance (LMI).
- Pest & building inspections: Ensure that you have a solid home or investment property by ensuring you complete pest and building inspections. This shouldn’t be overlooked as it might cost you far more in the long run going without.
There are other costs to consider; such as ongoing mortgage repayments, utilities, moving costs, council rates, and strata fees. Not to mention all the repairs and maintenance to your home. It’s wise to have $5,000 – $10,000 in your savings account for emergency repairs.
#4 Get home loan pre-approvals
This is otherwise known as conditional approval or approval in principle, securing pre-approval before even searching for your home is ideal.
This is so you know your price range. By providing your lender or bank with your financial details, like your credit report, savings, investments, and income. They’ll be able to review the information and grant you with pre-approval to borrow up a specific amount.
#5 Picking the type of property and the suburb
Buying a home is like riding an emotional rollercoaster. You need to have a clear sense of what you’re looking for. List of priorities vary from one investor to another, singles and those looking to purchase a family home. Consider creating a checklist of all your non-negotiable, “must-have” requirements.
To find out where you can afford to buy, research on property prices or reach out to a property management firm, like WA Building Company. There are lots of existing property market data that would help you quickly find the median price of an area you’re interested in.
What type of property is right for you?
- Any style preferences? Art deco, Victorian, modern, or a colonial home?
- How many bedrooms, bathrooms do you need? Do you require big living spaces or parking spots?
- Do you need a unit, a house, a studio, a loft, a townhouse, or an acreage?
First Home Buyer’s Grant
The WA State Government is around to help make home ownership dreams come true, through the First Home Owner Grant. That’s a very handy $10,000 incentive that you can use to make the move to home ownership.