Life is full of decisions: relationships, children, career and lifestyle. Buying a home is about the biggest financial commitment and decision you'll ever have to make. However, it's also going to be an exciting turning point, one that will almost certainly make the most impact on your lifestyle. For many it will be something never done before. Selecting the right home, in the right area, organising finance and negotiating the sale - it all sounds a little daunting. Yet it isn't as complicated as you may think and there are many ways your agent can help.
What kind of home do you want?
The first step is to decide what kind of home will suit your tastes and your lifestyle. Start an all family member housing priority discussion before beginning to look at your options. Begin with a realistic family requirements "must list". Include every member of the family in the discussion. - Anticipate potential changes in your family's lifestyle and size.
- What location will be convenient for all family members?
- Home purchases are too often based on the type of house without sufficient thought about schools.
- Shops or extracurricular activities important to all household members. If there is more than one wage earner, think about the convenience and cost of both commuting to work.
- Do you need to make special considerations for books, collections, art, clothes, seasonal storage, sports, games, hobbies and valuables.
- Establish the price range you can afford to consider.
- How long do you expect to live in the home? If it's only for a short time, resale value may be of paramount importance.
What can you afford?
Before you actively begin to look for a home, there's one very important thing you need to determine - what you can comfortably afford to pay for your new home? A lending institution will apply a Qualifying Ratio, the percentage of a home buyer's gross income that can prudently be allotted for debt, based on your income or incomes. The rule of thumb used by many lenders is 28% or 36%, which limits the sum of monthly mortgage principle, interest, tax and insurance payments (PITI) to 28% of the home owner's gross monthly income and further limits the total of all long-term debt payments to 36%.
A few basics about home loans
To obtain a home loan, you'll need to be 18 years or older and have the income to meet the loan repayments. Most institutions will lend money for a home whether it's a flat, unit, house or land package. A number of different home loan options are available. Many lenders maximum term is 30 years for a home loan and 25 years for a residential land loan, however you should consult your lender in this regard.
It's the home of your dreams and you can afford it!
There are two ways to buying a home - auction or private sale. Offers to purchase may be made in two ways - conditional or unconditional. An unconditional offer means you are committed to buying the house as listed (with or without drapes, fixtures, etc) at the price agreed without any other conditions. A conditional offer means that you will buy the property only if certain conditions are met. These must be listed on the Offer to Purchase. For example, your offer may be conditional on arranging finance.
Buying at auction
Auctions may be held either at the property, agent's office or hotel seminar room. You will be given a chance to inspect the property usually at an open day a week or two before the auction or by arrangement. Prior to the auction, it is advisable to always have your solicitor review the terms and conditions of the Contract of Sale of Real Estate. Whatever the disclosure requirements are in your state, you should seek the following information from the vendor: - Search of the title documents.
- Sewerage diagrams.
- Full list of annual out-goings, such as water and council rates.
- The zoning of the property.
- Details of the mortgage (if any) currently attached to the property.
- Details of any caveats, encumbrances or easements.
- Details of any builder's guarantees.
- Council permits for any renovations, additions or alterations to the property.
- If the property has a strata title it is important to see the folio of the Register for the lot and common property and a copy of the strata plan and body corporate minutes.
What do you do when your bid is successful?
When your bid is successful, you will be required to pay the deposit (usually 10% of the purchase price). Immediately after the bidding, contracts are signed and the deposit is paid. There is no cooling off period. You are committed to buy. There are occasions when the bidding does not reach the owner's 'Reserve Price' and the house is not sold. The house is then considered to be 'passed in'. If the house is passed in, the highest bidder usually has first opportunity to negotiate with the seller and the agent.