The First Homebuyer Process
Make 2022 The Year You Start Your Journey As A First Home Buyer
Transcript of: The Homebuyer Process
Hey guys, today we’re going to talk about the home buying process. After people worry about the deposit, the whole process is probably the next thing that they get to. And it can get a bit intimidating.
Again, because people just researching online and online, if you haven’t realised, there’s lots of information that is right. But there’s a large amount of information that is also not the exact truth or it just doesn’t apply to you. The information may be a bit old or outdated.
So it’s very overwhelming because people just get online and think I can figure out how it works. And then they get lost in you know, abbreviations, LMI, FHLDS, that sort of stuff. So today, what I wanted to do was just basically simplify it, make it an easy thing for you to figure out so you know what you need to do to buy your first home.
Hello, and welcome to the First Home Owner Concierge Podcast, where our sole target is to get you into your first home. Now on to today’s topic.
Alright, so what I’m going to do upfront is, I’m just going to summarise it for you. Because I’m probably going to talk for the next 15 minutes in detail about the process.
And I can understand that 15 minutes worth of me talking probably means you’re confused after the first five minutes. So basically, I’m going to summarise the purchasing process.
What is the first step of the homebuyer process? You will need to build your team!
First of all, what you need to do is go see a mortgage broker.
The mortgage broker is going to be able to figure out how much you can borrow, what deposit you have, all the grants and schemes, and they’re going to be able to get your preapproval.
The second step you need to do is you need to get a conveyancer. The conveyance is the person that handles the legal transfer of title between the sellers, names and your name, the next thing you need to do is go shopping.
So how do I buy a house? How do I negotiate the clauses with the real estate agent? Should I buy an auction or private sale, that sort of stuff. And from there, once you’ve bought your house, your loan gets approved, and you’re done. So that’s basically simplifying the process.
Now let’s take a bit of a deeper dive into that. I’ve got on the rundown here to talk about starting to save. Honestly, if you don’t know how to save, you’re probably not in a position to get a home loan, it shouldn’t be that hard. I don’t really want to talk about it.
Also, budgeting is pretty boring. I just want to move on to the good stuff. And that’s really what you need to know, basically, you’ve got a certain amount of money in your account. And its now time to go get your loan, if you need to know how much deposit you need.
There is an episode of this podcast, I think it’s two episodes ago, that goes into that, but you know how much you’ve got.
And you know, that’s roughly about what you need to get into the market. Or maybe you don’t know what you need, but you’d like to know what you need.
What Does A Mortgage Broker Do?
What you do is you basically go see a good mortgage broker, if anyone needs to see a good mortgage broker, you can see us here at Will Bell Mortgage Broker, this is what we do, half of our clients are First Homebuyers. I’m just going to go a bit deeper into why you should use a broker.
So firstly, a good mortgage broker will be able to get what you want, which is to be able to buy your first home. They’re going to be able to hold your hand the whole way through the process. Sometimes if you’re going direct to a bank, they may not just approve you because of internal lending policies. But sometimes they’re not so good at customer service. And they may be able to get a loan approved.
But the approval isn’t what you want, you need to be able to get into your own home and there is water to go under the bridge between a loan approval and actually settling and moving into your own home.
First and foremost, the broker is going to be able to figure out how much you can borrow. And that will vary slightly at different lenders. If you’re needing to go and borrow, kind of to the further end of your borrowing capacity, it’s going to count having a good broker rather than just going to see your bank broker can also figure out all the grants and schemes you can have access to.
This is confusing, even to me as a broker. I’ve been doing this for 11 years under my own company. And it gets confusing because governments, federal and state governments change all this stuff all the time.
Using a good broker who knows how to do the research on this sort of stuff, and can figure out what you qualify for is really important because it can make the difference between you having enough deposit to get into the market now, versus waiting 12 months for example.
The other thing a good broker will do is they’re good at making a plan, you know, if you come to me and you’ve got, you know, 10 or 15% of the purchase price, and you’ve got good solid jobs, it’s a very easy, obvious plan to make.
But if there’s certain things about your situation, maybe it’s the type of work, maybe you’re in casual work, maybe your deposit is a bit lower, it does pay to put a plan in place. A lot of people will go to a bank or to other larger brokers, for example, and they might just get declined. And they may not think, why did I get declined?
And what can I do to get approved in the future, a good broker is going to be able to figure out what you need to do to then get the loan approval in the future. The last thing I want to talk about with the mortgage broker, which is probably obvious thing for a lot of people is they’ll help you get a pre-approval.
What is a pre-approval?
What’s the pre-approval, a pre-approval is basically a piece of paper from a bank or a lender saying that we’ve had a look at your pay slips your credit file, all your financial details, and we’re happy with all of that.
The reason why it’s not an approval is because they want to wait till they’ve got a signed contract. They can have a look at the house you’re purchasing and making sure that the house is actually there, and it’s worth kind of what you’re paying for it. But once that’s done, then you move to the approval.
What most people would do is basically start looking for a home once the pre-approval is done, a lot of people actually just start looking for a home before they get the pre-approval, there is one more important step that you should take and that is to organise your conveyancer.
What Does A Conveyancer Do?
So as I said before, the conveyancer is the person who manages the transfer of title between the sellers name and your name, and they handle all the legals why it’s important to set this up now is when you go out looking for houses and you’re negotiating contracts, you can show the contract to your conveyancer, just so they can make sure there’s nothing funny going on with what you’re signing.
The next step is the step that people get the most excited about. This is an important one for me to chat about, because people get the most excited about it. But I see excitement turned to basically being exhausted and tired and fed up in a reasonably fast amount of time.
Most people especially in the hot market, we’ve had the last one or two years, we’ll spend their weekends going out looking at all these houses, and realising that they’re getting outbid, and they’re getting tired, because they’re working all week during the week, and then they’re using the whole weekend looking at houses.
There’s a couple of things you can do to kind of save your time. The first one is do your research, it’s pretty simple. The realestate.com.au and domain have a song tab, and you can see what properties in the areas you want to buy have sold for.
The reason why that’s important is because a lot of first-time buyers will basically go off what the price that the property is advertised for thinking that’s within my budget, I’ll be able to buy it.
Generally, what happens especially in this hot market is they realise they’re probably actually 50 grand or 100 grand out of the market. And that can be a bit soul crushing, because sometimes it forces people to have to readjust their expectations, they may have to buy in the next suburb over which may not be so desirable, or they might just have to downsize on their expectations. So doing the homework is super important, it’s actually super easy, you just need to put a bit of time into it.
And from that you’ll understand what a fair price based on the current market of a place is that you’re looking at. Another common thing when it comes to buying the home is the finance clause or the subject to finance, which is a common one.
What is a finance clause?
What a finance clause is, is basically something in the contract, which says if you don’t get approved for the loan, you can back out of this without any penalty. Remember before how I mentioned that, when you get a pre-approval, it’s pre-approved under the condition that the house is going to be acceptable to the lender.
Well, this is where this comes in, you need to sign the contract. But obviously you haven’t been approved. The way to kind of mitigate that risk of you signing a contract is to put a finance clause in.
Generally, you sign the contract with 14 days finance, which means you have 14 days to get approved for the loan. Something that’s important for you to note is quite often this is extended because banks take longer sometimes to approve loans. The other clause that’s important is the building and pest inspection.
So that should be pretty self-explanatory. You get an inspector to go and do the building and pest inspection. If there’s anything drastically wrong with the property, then obviously you’ll know about it, and it will allow you to back out of the deal or renegotiate it.
Don’t get too concerned if you’re worrying about these financial things or these legal things. Because if you’ve got your conveyancer organised, and you’re using a good mortgage broker, they’ll both make sure that you’re putting these things into the contracts.
These things are very normal, you know, they’re probably in over 50% of all the purchases that go through. The other important thing you want to know is the difference between buying at auction and a private sale.
A private sale is a standard, you know, you go and see the open house and you’re negotiating with the agent. In that situation, you can use your finance clause, any building and pest inspection. When it comes to an auction, however, that is an unconditional sale, which basically means you can’t put any finance clause or any other conditions in that will protect you.
They shouldn’t stop you from buying the house. But you really need to have a good dialogue between yourself and your broker to understand your chances of getting approved. Once the loan is approved, it’s pretty straightforward to settlement. You do need a good broker and conveyancer working in the background to make sure everything happens on time. You’ll get your loan documents, you’ll sign everything up. And then once the bank has all the contracts, they’ll let everyone know that they’re ready to settle.
Then it’s up to your conveyancer to tee up the settlement between your bank and the vendor. And usually, the vendor has a lender as well. But as I said, all that goes on in the background, so you shouldn’t have to worry.
All you should do is have confidence in your mortgage broker and your conveyancer. Once it settles, it’s done, done and dusted easy. So that’s why I say use your mortgage broker and you can pick a good one because they will make your life very easy.
I hope that’s giving you a lot more insight into the process of buying your first home. If you need any help or if you’ve got any questions, please get in contact with myself, I’m only happy to help. As I said this is what I do. Regardless, I hope you found this information useful. Good luck!
Thanks for listening to today’s episode of the First Home Owner Concierge Podcast. If you’ve got any questions or you would like to get into your own home or you just want to stalk me online. You can search Will Bell Mortgage Broker on either Google or Facebook.