How to buy a house (step-by-step)
From suburb research to finance, signing contracts and moving in, we can guide you through the entire home buying journey.
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Keen to buy a house in the near future? Whether you're planning to buy your first home, your next home or an investment property, we break down the process of how to buy a house into seven clear steps.
Your job security, number of dependents (if any) and lifestyle habits will influence how much you can borrow and the type of property you can afford. Here are some key points to think about when deciding if you're ready to buy a home.
When reviewing a home loan application, most lenders prefer that you’ve been in your current job for at least 12 months as this demonstrates that you have a stable source of income that can be used to service your mortgage repayments. If you have high job security, then you represent a lower risk to the lender.
Lenders will also be interested to know about your type of employment (casual, part-time or full-time) and the prospect of your continued employment.
Depending on your occupation, some lenders may offer professional package home loans and in some cases it may waive lender’s mortgage insurance (LMI) if you’re a doctor or accountant, as you are perceived as a low risk borrower due to your high earning potential. If your employment is secure, then you may be ready to buy.
On the other hand, if you’re a low-income earner or you’re receiving Centrelink benefits, it may be more difficult to qualify for a home loan. If this describes your situation, seek independent advice about your readiness to buy a home. While it may be possible for you to qualify for a home loan with a specialist lender if you can prove that you have a secondary income source to repay the mortgage, you need to think about whether this is a financially responsible move.
One of the biggest lifestyle changes comes with the decision to start a family. It will influence your ability to purchase a home, because the number of dependents that you have can affect your borrowing capacity.
In general, each dependent that you have will lower the amount you can borrow by $50,000-$60,000. This is because lenders will request that you factor in costs such as childcare, education fees and unexpected medical expenses.
If you plan to receive government benefits such as Family Tax Benefits, keep in mind that some lenders only consider this as a secondary source of income and you’ll need to supply supporting documentation when completing your home loan application.
Step 2: How much can you borrow?
Taking out a home loan will probably be the biggest financial decision you’ll make in your lifetime, so you should sit down with an accountant during this preliminary stage to see how much you can afford to borrow.
Even if you haven’t started looking at suburbs or properties yet, it’s a good idea to get an idea of how much you can afford to borrow as this will help fine-tune your search later on.
Your credit file and the amount of existing debt that you have can reflect whether or not you’re ready to purchase a home. Request a copy of your credit file to review your financial health.
If you have bad credit, you may not be a good candidate for a home loan application. However, there are lenders that specialise in borrowers with bad credit.
Ideally, you want to come up with at least a 20% deposit so you can avoid paying lenders mortgage insurance (LMI) for a full documentation home loan.
If you don’t have at least 10-20% deposit saved, there are low-deposit loans available, however you may want to think about whether you are financially prepared to buy a home, and whether you can afford to pay for mortgage insurance.
Look below to see the mortgage insurance costs for different deposit sizes.
When estimating the costs of buying a home, you need to break down government charges (such as stamp duty), lender's fees (including the application fee) as well as other associated costs (such as conveyancing or inspection fees).
Use our calculator to estimate your home-buying costs.
Remember that you’ll also need to factor in a contingency buffer for holding costs such as repairs and maintenance or a rise in interest rates if you take out a variable rate mortgage.
Let’s assume you’re purchasing a property that will be owner-occupied and is worth $650,000. The interest rate is 4.5% and you have a 20% deposit of $130,000. But your deposit isn't the only upfront cost involved. Here’s a roundup of some of the major upfront costs.
- Stamp duty
- Legal charges
- Building and pest inspection
- Mortgage application fee
- Settlement fee
- Home and contents insurance
- Lenders mortgage insurance (LMI)
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We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.