Are you dreaming of buying a home in 2024 but feel like you’re lost in a confusing maze? However, with the right knowledge and tools, getting your own place has never been easier. Today, you’ll learn How to Buy a House in 2024.
We’ll cover everything from the exact step-by-step process of buying a home, the different people you need to talk to and some massive pitfalls home buyers make every day. By the end of this article, you’ll have all the tips and tricks to make your dream of home ownership a reality.
The best part?
You won’t need a massive deposit to secure your dream home.
In fact, there are THREE different ways of buying a home with no deposit.
Let’s dive in
Table of Contents
Quick Summary
- 1. Decide to Buy: Evaluate if it’s the right time for you to buy a house versus renting.
- 2. Consult a Broker: Determine your borrowing capacity and additional costs like stamp duty and fees.
- 3. Choose a Home Loan: Work with a broker to find the best loan for your needs.
- 4. Get Pre-approval: Secure a preliminary loan approval to strengthen your offers.
- 5. Find the Right House: List essential features and research properties.
- 6. Research: Check property prices and get flood reports.
- 7. Inspect: Conduct thorough physical inspections and use checklists.
- 8. Make an Offer: Use a straightforward template to submit offers.
- 9. Hire a Conveyancer: Ensure legal protection in the buying process.
- 10. Sign Contract of Sale: Review and understand all terms and conditions.
- 12. Sign Loan Contracts: Finalise your loan and property transfer.
- 13. Move In: Arrange movers and take possession of your new home.
1. How to Buy a House: Decide It's Time To Buy
Buying a house isn’t easy. It can be a long and expensive process—sometimes taking up to 12 months. On the other hand, owning a house is an incredibly rewarding experience.
It can help you build equity in a property, grow your wealth and give you security in owning your own place.
The first step in all this is just deciding if it’s time to buy, if it’s time to invest in property or if it’s better to keep renting.
Realistically, there is no right or wrong answer for anyone; it is up to your personal preference… But the first step to buying a house is deciding you are ready to buy!
However, if you live somewhere where property prices are unaffordable, there is another strategy you can consider. This strategy is called Rentvesting and allows you to buy where you can afford whilst living where you like – giving you the best of both worlds.
Read More: Can’t Afford to Buy Where You Live? [We’ve Got the Answer!]
2. Talk To A Broker And See How Much You Can Borrow
Sitting down with a broker is a good next step. Not only will a broker tell you how much you can borrow, but they’ll also factor in the extra costs of buying a home, like stamp duty, solicitor fees and other costs you need to consider when buying your home.
A Brisbane mortgage broker will help you determine your home-buying capacity. For example, if you’re buying a $550,000 home in Queensland, there’s an additional $15,000 in costs, which include Stamp Duty, Transfer Duty, solicitor fees and other miscellaneous fees that you need to add on top. So, in total, you need $565,000 to buy the home. In this case, not only do you need a 5% deposit, which is $27,500, but you also need to cover the $15,000 costs we have just mentioned. So, the minimum savings you’d need if you’re buying a $550,000 home as a first home buyer in Queensland is $42,500.
Talking with a broker can also make you aware of what other schemes you might be eligible for as a first home buyer. You may be able to get a grant if you’re buying a brand new property, or you may be able to take advantage of the home guarantee scheme and not pay lenders mortgage insurance. We will cover these in a later section.
This relatively quick conversation with a broker can guide you on your budget for your first home purchase. You get an understanding of the repayments and the ongoing costs to ensure they fit in with what you can comfortably afford.
3. Find A Home Loan That Works For You
In the old days, there was only one type of home loan, so you didn’t have any choice in what kind of loan you got.
Nowadays, there are literally hundreds of home loans available in Australia, all with different features and benefits.
At this point, you have already spoken with a Mortgage Broker, so they will work on your behalf to arrange a home loan through a bank.
As we mentioned above, a mortgage broker will look at what you want to achieve and find a home loan that works for you. They will also help you
work out a price range and budget for buying a home and give you an idea of what you can spend.
When it comes to choosing the right home loan for you, it is best to use a mortgage broker. So, if you haven’t already spoken to a broker, you need to speak with one at this stage.
Read More: Home Loan Features Explained
How to buy a house with no deposit?
As we mentioned above, there are currently THREE different ways to buy a home with no deposit.
- Guarantor Home Loan. Buying a property with your parents as a guarantor lets you borrow up to 105% of the purchase price! This means you don’t need any savings as your parents provide a guarantee secured on their property.
- Gifted Funds. If you have a family member or relative who is willing to give you the deposit, you can buy a home effectively with no deposit!
- First Home Owners Grant (Great Start Grant in Queensland) – In Queensland, you can purchase a brand new property or build a new home and receive $15,000 from the government, which can be used towards your deposit plus stamp duty benefits.
Read More: How to buy a home with no deposit
4. Get A Pre-approval
A pre-approval is a preliminary loan approval from a bank letting you know what you qualify to borrow. It is also known as a conditional approval, indicative approval, approval in principle or home seeker, depending on your bank.
To get a pre-approval, you just need to give your credit history to your broker or lender, who will then verify your income and give you fairly clear guidelines on what you can afford to borrow.
In effect, it’s like the lender is telling you they will lend you X amount of money provided your income and personal circumstances don’t change. This allows you to make stronger offers on the property with shorter finance terms, meaning you can get a better deal and get into the home of your dreams sooner!
BEWARE! Not all pre-approvals are reliable when buying a house.
Not all banks are the same when it comes to assessing a pre-approval home loan. Some banks may just complete a credit check and not check any of your documents until you lodge a full mortgage application. This may lead to your home loan being declined after pre-approval.
Read more: How reliable is your pre-approval?
5. Find The Right House
Having a pre-approved loan allows you to think ahead and plan your property search wisely. This is often the hardest part of the process—trying to narrow down the type of property you want, the suburbs you like and what you want from that property.
Create a list of essential features that you definitely must have in your home. This will keep you focused on purchasing a home that is suitable for you and meets your requirements.
Property can be a largely emotional purchase, so you need to consider a few things before falling head over heels on a property:
- What is your “why” for buying this property? Is it to live in, or will you rent it out in the short term? The main purpose of the property will determine the kind of property you buy.
- Do you plan on staying in the property for a few years? Your first home is not likely to be your forever home; it is just your first step towards your future mansion!
- Can you afford repairs and upkeep on the property? If it is an older Queenslander-style property, have you budgeted for ongoing repairs and maintenance? Will it need a new kitchen and bathroom in the short term? Will you be able to afford these costs?
- If you bought the property, who would buy it from you in a few years? It’s good to start with the end in mind when buying a property. Always think about who you will sell it to in a few years. If it’s going to be a very narrow market like retirees, will this harm the property’s growth potential?
Read More: How to work out your property criteria
6. Research Your Potential Home
Regardless of what you intend to buy, carrying out market research is really important to identify the right price and reasonable quality of a product.
Because purchasing a home is a huge investment, you must conduct local market research to find out the current prices of the type of property you are looking for, as it will enable you to avoid paying above the market value.
How to buy a house: Local Research Tools
Here are some online methods you can take to research the value of a property:
- OnTheHouse (Best method)
- Property Value By CoreLogic
- Real Estate View (Worst method)
In addition to checking the value of your home, it is important to get a flood report to make sure you are not buying a property in a flood zone. If you do decide to buy the property anyway, then at least you will be aware of the risk.
Read More: How to Research your suburb and surrounding areas?
7. Complete Your Property Inspection Checklist
There is no substitute for physical inspection when it comes to purchasing a home.
It allows you to see other attributes that you would have otherwise ignored while searching for a property, such as its locality.
Whenever you plan to visit a property, plan a building and pest inspection before making a purchase, as it will disclose the problems beforehand that would otherwise be costly to fix.
Download now: Property Inspection Checklist
8. Buying a House: Make An Offer
Now, the exciting part.
Making an offer on a property is an easy process.
You do not need to sign a contract of sale to make an offer on a property.
If you send an offer in writing (via email, for example) you can get your offer accepted by the agent (and the sellers) before taking time to fill out the contract of sale.
We have personally used this template to purchase properties in the past. It’s worth keeping your offer short and to the point, including:
- Purchasing Entity: I.e. your full name, including middle names.
- Price:
- Deposit
- Finance and building and pest terms
- Settlement Dates
- Lawyer details
Read More: Making an offer on a house below the asking price.
9. Find Your Conveyancer or Solicitor
A conveyancer or solicitor looks after your legal interest in the home-buying process. Specifically, they will look through the contract of sale and ensure that there are protections in place to look after you.
Now, conveyancers are not going to be able to do much until you’ve identified and found the right property and you’ve got a contract you’re going to look to sign. However, it is worth being on the front foot and having them ready for that day when you need to make the call.
Our tip for a conveyancer is don’t go cheap.
It might sound like a great idea to save $200 on the conveyancer’s fees, but this can be extremely risky, especially since you are dealing with hundreds of thousands of dollars.
How to buy a house: don’t go cheap on conveyancers
We had a situation with a home buyer named Tim a couple of years ago who went really cheap. He was using a friend of a friend’s mom, who was a part-time conveyancer, to help with his first home purchase. It was all going well until the settlement day when his friend’s mom was off sick. Being the only conveyancer there, the settlement couldn’t be completed.
When it comes to choosing a conveyancer, check out their Google reviews, and if one conveyancer seems more legitimate but another one comes as recommended by a friend, it’s worth going with the safer option. You could be risking your $600,000 home over a $200 fee.
Read more: What are the differences between a Lawyer and a Conveyancer?
10. Questions To Ask Before Signing The Contract of Sale
Ok, so you’ve made it this far, but…
Do you know what the Contract of Sale is?
The contract of sale is a legal agreement that contains terms and conditions agreed upon by both the seller and buyer in a clear manner.
It is prepared by a lawyer or in Queensland by a real estate agent and typically includes the following:
- Name and address of the seller
- Plan number, reference number, and address of the property
- Fittings and removable items, such as appliances, blinds, or any other easily removable items, included in the sale
- Deposit amount and purchase price of the property
- Details about the settlement
- Information about the property as to whether it is vacant or on lease
- Sometimes, it includes reports, such as building inspections, pest inspections, etc.
It is very important to look at the terms and conditions of the contract before signing it as it may involve special conditions that aren’t in favour of the buyer. This is where your solicitor or conveyancer will come in.
Keeping that in mind, here are five questions you should ask before signing a contract of sale:
Question 1: Are You Getting What You Are Looking For?
Buying a property in a real estate market doesn’t always go as planned. There are a lot of things you have to consider, and at times, you have to come to a compromise. But when you get your contract of sale, take a look at the following things.
- Look at the copy of the registered plan that is normally attached to the contract and check if the property description is the same as inspected. If something doesn’t seem right on the plan, hire an independent surveyor to inspect the property and prepare a plan.
- An unregistered or registered easement is what you should be looking at next. If the house has any easements, there might be restrictions on how you can use that portion of the land.
- As discussed earlier, it’s important to get a clear idea about the fixtures you will be getting along with the property. These are things like light fittings, carpeting, pool equipment, stoves, blinds, or curtains. Clearly ask what is included in the contract of sale because it is not right to assume that everything you saw during the inspection will be included in the sale.
Question 2: How Much Deposit Do You Have to Pay?
This is the second question you should be asking when going ahead with the purchase. Buying a house is a big decision, and you should be fully informed before taking any steps toward it.
The amount of deposit you are required to pay will be included in the contract. In Queensland, it is divided into two parts:
- The first is a holding deposit (also called the initial deposit), and is usually a small amount of $500 to $2,000 (or up to 0.25%) to secure the property.
- The holding deposit shows you are serious about wanting to buy the property and needs to be paid within 3 business days of signing the contract of sale and can range from $10,000 to 5% of the purchase price…
Read More: Signed a Contract of Sale? Steps to follow
Question 3: Does the Contract of Sale Involve Any Special Conditions?
As discussed, you should definitely ask about any special conditions included in the contract of sale because these are the things you should be reading over and over again until you get a clearer picture. An example of special conditions can be things like paying a penalty to delay the settlement or a transaction being subject to tenancy.
As a buyer, you too can include special conditions in the contract, such as a satisfactory report of pest or building inspection, or sale is subject to selling your own property.
Question 4: How Long is the Settlement Period?
It is crucial to choose a reasonable settlement period, keeping in mind your particular situation. For example, if you are in the process of selling your house and want to move to a new home by a particular date, it’s important to negotiate a settlement date that is suitable for you.
Normally, the settlement date can be 30 days, 60 days, or 90 days. Some sellers might not want to go with the longer settlement period, while others may not want a shorter period. So consult with your real estate agent as to what the seller’s motivation is.
Question 5: Does the Purchase Involve Cooling Off Period?
The cooling-off period is mentioned in the contract of sale. You must be aware of what can happen if you plan to withdraw from the contract after signing it.
Also, find out about any financial penalties in case of withdrawing from the contract.
Buying a property comes with huge financial responsibility. Therefore, take your time, conduct due diligence, and ensure the terms and conditions are satisfactory. Speak to our team of experts today for more information.
Read More: Signed a Contract of Sale on a Home? [5 Simple Steps to Settlement]
11. Sign The Contract Of Sale
If the owner likes your offer, they will accept your contract, and you will both put your names on the dotted line. The agent will contact you and say congratulations, you’ve got your new home; now it’s time to do everything else. At this point, you’ll forward your contract to your broker or conveyer.
Organise a build and pest inspection.
This is a good part of the process just for peace of mind. A building and pest inspector is a qualified Builder who’ll go and check out your new home, look in the roof, check for termites, white out damage, water damage, etc. and give you a bit of peace of mind that the place is in tip-top shape.
If they find something wrong, you can talk to your solicitor about cancelling the contract and seeing what that involves or try to negotiate the price down if it’s things that aren’t too big.
Take out insurance
From the minute you sign your contract of sale, you should take out insurance. This is because, once you sign the contract of sale, the property is now your responsibility, even if you haven’t got the keys yet. Insurance will protect the property from fire or flood damage,
12. Sign Your Loan Contracts
Once you have taken all the steps mentioned above, the broker will forward a copy of the signed sale contract to a lending institution where arrangements are made for the property valuation.
If the result of the valuation is fine and other loan terms have also been met, the lender will grant full loan approval.
This is where your broker and solicitor come into play as they transfer the property into your name and ensure the settlement occurs within a specified period.
After successful completion of the entire process, all you have to do is pack your belongings and wait for settlement (which typically takes 30 to 90 days).
13. Move Into Your New House
Woo, you made it! Time to arrange the movers and get the keys because you are now a homeowner!
Bonus Infographic: Step-by-step Guide To Buying A House
As an added bonus, we have detailed the home-buying process in an infographic. You can use this as a checklist to help you go from finding to settling your new home.
Bonus: Tips to buy a home during the Affordability crisis in Australia
Right now, Australia is facing the hardest affordability crisis we’ve experienced in over 20 years. Interest rates are up, the cost of living is getting harder, and incomes are squeezed, making it tough for first-time home buyers to enter the market. To give you an idea, the average income needed to service a new mortgage has skyrocketed to nearly 49% nationally. This is a significant jump over the last decade alone, especially in cities like Sydney, where you now need 74% of your take-home income to service a new loan on a house.
We’ve seen the time taken to save a deposit increased to about 10 years on average just for your minimum deposit, so we’ve seen huge issues not only in the rental market but also in being able to afford your own home. Here are 3 tips to get into the property market:
- Explore government schemes. There is the Home Guarantee Scheme, where you can buy a home with a minimum deposit of 2% if you’re a single parent and 5% if you’re a first-time home buyer.
- Consider different locations. It’s been said that, on average, most people buy within 5 km of where they’re currently living, which really restricts you because if you’re just looking in the suburbs near and dear to you, you might be priced out.
- Recalibrate your expectations. Your first home doesn’t need to be your forever home. With the current trends, it could be worth considering a unit. This could be your stepping stone to getting into the market. Now, you can always buy a unit, hold on to it, and maybe trade it up sometime in the future.
Bonus: Common Mistakes To Avoid
Not getting a pre-approval.
A lot of people don’t realize that when the bank actually assesses your application, the number that you might have anticipated you could borrow can drastically change. If you’ve got a lot of over-time, unique incomes, allowances, commissions and bonuses, some lenders can take it on board, but if you’re not careful, they might not include that income, which can drastically change your borrowing ability.
So, getting a pre-approval in place is vital to knowing exactly how much you can borrow. However, you must also make sure that the pre-approval is fully accessed. You can find all the information you need to know about pre-approvals in this article.
Not understanding rentvesting
Rentvesting is purchasing a property that is in an affordable area and renting where you prefer to live. This trend continues to grow amongst young Australians, particularly because of the affordability crisis. You can literally buy an investment property way out in Perth if you’re living in Brisbane, continue living in the city in Brisbane and know that you’re getting your cake and eating it, too. You’ve got something that might be capital appreciating, where you can afford, and it won’t impact your lifestyle.
New doesn’t equal no problems.
It can be pretty alluring to buy a brand-new property. It’s like buying a new car: You’re the first person to sit in it, and you think everything’s new, including the warranty. It makes a lot of sense, right? Not always. New buildings can have issues with concrete cancer, etc. So, you need to be diligent in checking out strata reports to make sure it’s going to make sense for you to buy new.
This is where an older block of units can be amazing. If they’ve been there for 30 years, they’ll likely be there for another 30 more.
Don’t skip the building & pest inspection
Another small mistake we see commonly made is skipping the building and pest inspection. If you can take some time off work, sit down when the Building and pest inspector is going through your new prospective home and understand what they’re seeing. If there are any issues, they’ll tell you on the spot, and you can potentially use any issues that the building and pest inspector flags to renegotiate the price down or if the issues are too big, you can walk away.
Not going through the house in detail
Once you buy a home, it’s your problem: The good, the bad and the ugly. With a home, you’re buying in the condition that you’re seeing it in. so if you’ve made an offer and it’s accepted, and you’ve still got your Finance clause or building and pest clause, take time to do a second inspection and go through the home in detail. Your building and pest inspector, unfortunately, isn’t going to check every power point and all the appliances.
One of the simple things you can do is turn on all the light switches in the house to ensure they work. If there are bulbs out, you can get this fixed up before you go unconditional in the contract. If there are power points, bring just a simple little socket. We’ve had some clients go as far as bringing a clock radio and testing power points to make sure they work because if they don’t, it’s going to be your responsibility to get an electrician in to fix it up.
Good Neighbours are Important
As the saying goes, you can choose your friends but can’t choose your neighbours. When you’re buying a home, you’re hoping to be there for a couple of years, and a bad neighbour can turn a beautiful new home into a horrible experience.
So, the best way to guard against this is to look around the street on your first inspection. Have a walk around, and get a feel for your neighbours. For example, if there’s junk in the neighbour’s yard, it will likely be there when you move in. Also, try to drive by Friday or Saturday night just to get a feel for the potential neighbours and what kind of people they are. Are they big party animals? Are they quiet? It’s nice to know what you’ll be in for once you move in.
Check out the local area
Check out the convenience of food, public transport and groceries. This is something you may not think much about until you have kids and it gets more important later in life. Are there nice walking paths nearby? Can you walk or ride a bike to local shops, or do you have to pop in your car? A great tool to check this out is Walk Score. You can literally put in the address, and it’ll give you a quick score to tell you what amenities are available and how far they are from your house.
Skipping the bad photos
Usually, everyone is looking for good photos, and if the listing has good photos, it can lead to bidding wars. However, if there are really crummy photos, it could mean you’re the only person turning up because people usually give a wide berth to photos that are not good. So don’t skip the bad photos, as you may be able to get a good deal.
The difficult thing with real estate is it can take a couple of goes to find the right one. So you might go through a bunch of crappy photos which could turn out to be as crappy as the photos look in real life. You’re just going to have to go and check them out.
Well-maintained but poorly presented homes offer better value, so keep that in mind when you’re on the hunt.
Don’t take too long to make an offer
We’ve seen this time and time again: The market can move. During COVID-19, the market was really slow, and properties were sitting on the market for 2-3 months. You could take your time to casually check out a property online, do inspections, and make an offer—it was a real buyers’ market. You had the control.
In the current market, in many places around Australia, the days on market are under 30 days. 30 days means from when it’s listed to when it’s sold and potentially settled, so stuff is selling really quickly. Offers are being made before the first open home, and you need to be aware of this.
Not knowing who the real estate agent is really working for
There are some really good estate agents who are genuinely out there to help sellers and buyers and bring people together. But there are also a lot who aren’t like this.
You must remember that real estate agents aren’t licensed financial advisers; they can’t give you tax advice, they’re not registered tax agents, and they can’t talk to you about negative gearing and the benefits around that. Real estate agents aren’t the local Council or town planners, so take any advice about rezoning with a grain of salt.
At the end of the day, a real estate agent’s job is to sell the property for the most money in the least amount of time possible. Don’t take it personally; you just need to take it as it is and understand what you’re playing with.
Not factoring in extra costs.
It’s worth considering some common extra costs. A common one we see these days is body corporate or strata fees. Did you know this can drastically impact how much the bank will lend you? For example, if your body corporate is $10,000 per year, that can be a few hundred a week in what you have to pay towards a body corporate, and the bank expects that to come out of your pocket—in addition to the mortgage repayments.
Frequently Asked Questions
What is a cooling-off period in Australian property purchases?
A cooling-off period is a specified timeframe after signing a contract of sale during which a buyer can withdraw from the purchase. The length and conditions of the cooling-off period are mentioned in the contract of sale and vary by state in Australia.
When should I take out insurance on a property I’m buying?
You should take out insurance from the moment you sign the contract of sale. Even though you don’t have the keys yet, the property becomes your responsibility once the contract is signed, and insurance will protect it from events like fire or flood damage.
What is rentvesting?
Rentvesting is a strategy where you purchase a property in an affordable area as an investment while renting in the area where you prefer to live. This allows you to enter the property market while maintaining your desired lifestyle.
Why is a building and pest inspection important?
A building and pest inspection is crucial as it can reveal potential issues with the property. It allows you to understand the condition of the home, potentially renegotiate the price based on any issues found, or even walk away if the problems are too significant.
What is Walk Score and how can it help in choosing a property?
Walk Score is a tool that rates the walkability of a property based on its proximity to amenities like shops, public transport, and food outlets. It can help you assess the convenience and lifestyle factors of a potential home’s location.
What are body corporate or strata fees?
Body corporate or strata fees are regular payments made by owners of properties in shared complexes to cover the maintenance and management of common areas. These fees can significantly impact your budget and borrowing capacity.
How do body corporate fees affect my borrowing capacity?
Banks consider body corporate fees as an ongoing expense when assessing your loan application. High fees can reduce the amount a bank is willing to lend you, as they expect these payments to come out of your pocket in addition to mortgage repayments.
What should I consider when choosing a location for my property?
Consider factors such as proximity to public transport, grocery stores, schools, walking paths, and the ability to walk or cycle to local amenities. These factors can greatly affect your lifestyle and the property’s future value.
What happens after my offer is accepted?
Once your offer is accepted, you and the seller will sign the contract of sale. You’ll then need to forward this contract to your broker or conveyancer to proceed with the purchase process.
What are some common extra costs associated with buying a property?
Common extra costs can include stamp duty, legal fees, building and pest inspection fees, mortgage registration fees, and ongoing costs like body corporate fees, council rates, and insurance.
How can I prepare financially for buying a house in Australia?
Prepare by saving for a deposit (typically 5-20% of the property value), understanding your borrowing capacity, getting pre-approval for a home loan, and factoring in additional costs like stamp duty and legal fees.
What is Lenders Mortgage Insurance (LMI)?
LMI is insurance that protects the lender if you default on your home loan. It’s typically required if you’re borrowing more than 80% of the property’s value and is usually added to your loan amount.
Can first-home buyers get government assistance in Australia?
Yes, various state and federal government schemes are available for first-home buyers, including the First Home Owner Grant, stamp duty concessions, and the First Home Loan Deposit Scheme. Eligibility criteria vary by state and scheme.
What’s the difference between a fixed and variable interest rate?
A fixed interest rate remains the same for a set period, providing certainty in repayments. A variable rate can fluctuate with market conditions, potentially offering more flexibility but less certainty.
How long does the home buying process typically take in Australia?
The process can take anywhere from 4-8 weeks from having an offer accepted to settlement, but it can vary depending on factors such as finance approval, contract conditions, and the agreed settlement period.
Next Steps For Home Buyers Looking For Information
Our team here at Hunter Galloway is here to help you buy a home.
Unlike other mortgage brokers who are just one-person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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