Useful Tips When Looking to Buy your First Home

1. Get a better understanding of what you can afford

Speaking with a bank or a broker can be a great place to start if you want a better understanding of your borrowing capacity. By analysing your circumstances (salary, savings, expenses), they’ll be able to provide you with an indication of your borrowing potential.

Lenders typically require a 20% deposit for a purchase (a 20% Loan-to-Value-Ratio or ‘LVR’). However, there are some circumstances in which lenders may approve the loan with a smaller deposit, such as where borrowers pay Lenders Mortgage Insurance (‘LMI’) or fall into certain categories of employment, including accountants or lawyers, amongst other occupations. A broker will be able to advise what’s best for your financial situation.

Additionally, even though it’s not required to purchase a property, a pre-approval can be a great way to gain confidence in your borrowing capacity. This confirms that a lender has considered your circumstances and has agreed to lend you a certain amount within your means.

There are some important things to keep in mind with pre-approvals:

• Pre-approvals are not necessarily binding bank commitments
• Pre-approvals usually expire within 3 – 6 months
• Excessive pre-approvals may impact your credit score

2. Act on research, not emotion

While “follow your heart” can be great advice for many big decisions in our lives, it’s best to use your head when buying property. Your first purchase should be sensible and informed, to set yourself up for success later in life.

The key to finding the right property is research. Become an expert on a few suburbs you’re interested in. Consider price trends, demographics, amenities - schools, transport and shopping - or any future investment happening in the area, such as new infrastructure. Agents and brokers can also provide valuable insights into an area, if you need assistance. The ideal property will be reasonably priced and offer a solid return on your investment in the long run.

Homes that have the opportunity for value-add improvements can be a plus, but be mindful of any red flags, such as structural or mould issues.

3. Negotiate on your property

Your ability to negotiate is often influenced by whether it’s a buyers’ market or a sellers’ market – usually indicated by the market clearance rates. As the market cools, your ability to negotiate on price can increase, so it’s worth getting familiar with the trends.

Studying sales in the area comparable with your prospective property will give you a reasonable indication of it’s worth. If you submit an offer and it gets declined, don’t take it personally. Stay in control of your offers and adjust them at your pace, on your terms.

It’s important to remember that agents are expert salespeople, whose interests are with the vendor. If you feel rushed or pressured while negotiating, back away and take your time to consider things objectively. Avoiding a bad decision is worth just as much as a making a good one. Even so, maintaining a positive relationship with the agent is always helpful, for current and future negotiations.

4. Find a mentor and work with professionals

The decision to purchase is 100% your decision, but it’s always wise to get the right support before you commit. Consulting with a third party to make sure this milestone is a step in the right direction can give you peace of mind.

You might be able to identify a friend or family member with successful purchasing experience and use them as a sounding board. Purchasing well is an art, and if you can find an experienced mentor, you’ll give yourself an advantage over other buyers.

Additionally, your lender or finance broker is a pivotal part of the purchasing process. They’ll identify your borrowing capacity and guide you through the loan application process, if you choose to proceed on a purchase. They will assist throughout settlement and beyond, so it’s important to choose someone that explains things clearly and is accessible, diligent and personable.

Should you submit a successful offer on a home, you’ll also need a solicitor to review and execute your contract. It’s worth investing in one with experience - they’ll highlight issues with your contract and assist you with negotiating terms which can save you much more than the outlay.