The Home Buying Process Explained
There are multiple ways to navigate the home buying process; but, the most common and simple way looks a little like this:
Starting the home buying process
Talk to a Mortgage Broker or Banker
Whilst this step is optional, it is generally the best first step in the home buying process. By seeking advice on your home loan options first, it can give you an idea of whether you can get a loan, and what your maximum borrowing capacity is.
Get a home loan pre approval in place
Once again, this is optional, but a home loan pre approval can give you confidence moving forward, and also give you some certainty over how much you have to spend. Pre-approvals are free with the vast majority of lenders.
Find the Right Home
Time to go home hunting. Be sure to have a look at a multitude of properties and don’t rush the process. No questions are silly, so be sure to ask the Real Estate Agent anything you are unsure of, and get a full background on the property and be sure it's the right one for you.
Negotiate a Contract of Sale
Once you have decided on the property, the next thing you need to do is negotiate a “Contract of Sale”. Whilst almost everything on the contract is up for negotiation, the main things to keep an eye on are:
- Price – There is no wrong bid here: if you offer too low, the seller will not accept it; and if you offer too high, the Bank will not accept it (the Bank will send a valuer out to value the house prior to approving your finances, and they will not proceed if the house is worth less than you are paying).
- Finance Clause – This clause gives you an out if you cannot procure the money to complete the purchase, and is highly recommended unless you are paying cash. If your Mortgage Broker or Bank cannot approve you home loan in the designated time-frame, you can talk to your solicitor about letting the contract “fall through on finance”, meaning you get your deposit back and needn’t continue any further. A finance clause is generally 14 – 21 days.
- Building and Pest Clause – Your contract should always be subject to a satisfactory building and pest report. Within the allotted time-frame, you are responsible for organising and paying for a Building & Pest Inspector to come out and report on the property – they will look for anything unusual in the building infrastructure, and report on anything they might find (termites is all too common). A building and pest clause is generally 14 – 21 days also.
- Fixtures and fittings – while “fixtures” (a toilet, for example) are always included in the sale price by default; things like washing machines, dryers and TV fixtures can be added into the contract and included in the purchase.
Get your Home Loan Approved
The next step in the home buying process is to get your home loan application submitted and approved. Talk to your Mortgage Broker about the process. If your home loan is not approved, despite your best efforts, you can talk to your conveyancer to request the contract is cancelled and your deposit returned – the seller will often ask for proof from your Mortgage Broker or Bank of this.
Building and Pest Inspection
It is your responsibility to organise a date, time and payment. Some inspectors will let you attend the property with them and ask questions as you go, others will not; but they will always produce a very comprehensive report to you, usually within 24 hours of the inspection. It is important to read this report carefully, and note anything that seems unusual or adverse – call the inspector for clarification if need be. If there is anything you are not happy with, you are best to talk to your solicitor, who can request the seller fix the problem prior to settlement, or reimburse you the cost of repair. You will need to be happy with the building and pest inspection before you can proceed any further with the home buying process.
Contract is Unconditional!
Once you have sorted your finances and building and pest, your solicitor will ask if you are happy for your contract to go unconditional. If you agree, there is no turning back, and you will be required to purchase the house for the agreed amount on the ‘date of settlement’.
Pay your Deposit and Government/Solicitor Fees
Many people don’t realise when you actually pay your deposit and government fees, but it is generally only 1 – 2 days before settlement. Your solicitor will let you know the exact amount required for settlement, and they will also give you the details of their trust account – where you must pay the money (not directly to the bank).
Settlement - The Home Buying Process is complete!
On your day of settlement, your solicitor will disburse the funds to the various parties involved, and then notify the Real Estate Agent. As soon as the Real Estate Agent receives confirmation of settlement, they will hand you the keys, the home buying process is complete and you can start moving your stuff in!