Purchasing a new house is one of the biggest financial investments you’ll ever make, and no doubt you’ll have many questions regarding the process. Here is the basic progression you can expect:
1) Find a home
Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online and driving around the neighborhoods that interest you in search of for-sale signs. Also put some feelers out there with your friends, family and business contacts. You never know where a good reference or lead on a home might come from.
2) Consider your financing options and secure financing
First-time homebuyers have a wide variety of options to help them get into a home, including loans and loans for home buyers who don't have the standard 20% minimum down payment. Your mortgage interest rate will also have a major impact on the total price you pay for your home, so shop around. It will really pay off.
3) Make an offer
Your real estate agent will help you decide how much money you want to offer for the house along with any conditions you want to ask for. Your agent will then present the offer to the seller’s agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits.
4) Obtain a home inspection
Even if the home you plan to purchase appears to be flawless, there is no substitute for having a trained professional inspect the property for the quality, safety and overall condition of your potential new home. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation.
5) Close or move on
If you are able to work out a deal with the seller, or better yet, if the inspection didn’t reveal any significant problems, you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.
Things you’ll be dealing with and paying for in the final stages of your purchase may include having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork.
Top Tips for first time buyers are:
– Construct your own personal cashflow model and see how much you can really afford.
– Get information about all the costs upfront, levies, transfers etc. These can be as much as 8% of the cost of the property.
– Seek advice – reputable bond originators give impartial advice for free.
– Shop around – the lending market is competitive and there are many different products available. Don't jump at the first offer you are given.
– Strengthen your negotiating position by getting pre-qualified for mortgage finance.
– Check the title deeds to ensure there are no onerous title deed restrictions or servitudes.
– Get a specialist to check for structural defects or roofing problems before you buy. Also, pay attention to plumbing and electrics.
– First time buyers should know the difference between occupation and possession. The change of ownership only takes place on the day that the transfer is registered at the Deeds Office.
– Look to maintain your level of payments if interest rates fall. Your bond originator will happily run the scenarios for you of putting away a bit extra every month into your bond repayments, and the effect this has of reducing the total cost of your loan.
– Putting a bit extra into your bond every month also turns your bond into a virtual high interest, tax-free savings account, since that money can be accessed at a later date for spending.