10 Tips for first home-buyers
1. LOAN CHOICES
With so many home loan products on the market, Ms Darnbrough said it was important not to choose a home loan based on rates alone.
She said the key was to look for a product that suited your needs, be it low set-up expenses and monthly fees or extra flexibility such as a redraw facility.
“It is also important to consider what type of loan you prefer — fixed or variable, ” she said.
“Borrowers needing certainty over repayments might consider a fixed-rate loan. However, this loan type may not offer a full range of features, such as the ability to contribute and redraw extra funds or use an offset account.
“Splitting the loan amount across fixed and variable may offer a solution for those seeking stability and flexibility.”
Ms Darnbrough said it was a good idea to seek pre-approval before starting the housing search to know exactly what you could afford.
“Having loan pre-approval (which is usually valid for three months) is especially handy at auctions where you commit to the property on the spot and pay a deposit, ” she said.
“Keep in mind, if your circumstances change from the time of pre-approval until you find a property, pre-approval may be withdrawn by the lender.”
3. LENDER'S MORTGAGE INSURANCE
When borrowing more than 80 per cent of a property’s value, it is a condition of a loan to pay lender’s mortgage insurance. LMI protects the lender if the borrower cannot meet the repayments and the proceeds of a forced sale of the home do not cover the loan.
Ms Darnbrough said because LMI protected the lender, not the borrower, it might appear there were no benefits to the buyer. However, it reduced the lender’s risk, allowing them to lend a large amount or approve a home loan without the buyer providing a 20 per cent deposit.
“The cost of LMI can vary depending on the percentage of the property value borrowed and the loan amount, ” she said.
First-homebuyers often get caught out by being complacent during the settlement process, LJ Hooker Settlements director Janet Hryb said.
She recommended appointing a settlement agent to facilitate the settlement process.
“While your real estate agent will recommend the services of a few settlement agents, it is entirely your decision to choose who will represent you for this task, ” she said.
“In choosing your settlement agent, it is recommended you choose an agent who is a member of the Australian Institute of Conveyancers in WA, and the best to choose are qualified Certified Practising Conveyancers, similar to an accountant with a CPA.”
Ms Hryb said there was a maximum fee schedule used to settlement fees.
“This fee will be for creating and co-ordinating documentation and settlement but there will be other registration fees and statutory costs you must budget for.
“At the time of engaging your settlement agent, ask for a detailed quote to ensure you budget for all costs.”
5. BUILDING INSPECTIONS
“Unlike the process of selling a car where a roadworthy certificate is a condition of sale, there is no legal requirement for a property vendor to disclose building faults, ” Houspect Building Inspections director Chris Walsh said.
A building inspection by a company that used registered qualified builders could highlight issues such as drainage or structural problems that might potentially cost a new buyer thousands in the future.
“Building inspections are a good way to insure against these problems, ” Mr Walsh said. “An inspector will not give the property a passing or failing grade, instead they provide a thorough report on the actual condition of the property with consideration to its age.”
Mr Walsh said while building inspection reports only seemed like a necessity when buying an existing home, they were just as important for new construction projects.
“Incomplete or substandard workmanship, defective installation and structural errors can turn a dream home into a nightmare in short order, ” he said. “Even the most reputable building contractor can overlook an error or two, which can lead to much larger issues in the future.
“Inspections can also help to facilitate problem-solving and business disputes, with the inspector acting as a neutral, unbiased third party.”
6. CONSIDER YOUR CONTRIBUTION
Before you start looking at prospective homes, it is important to understand how much you have available to put towards a deposit and purchase costs of a property, Mortgage Choice spokeswoman Jessica Darnbrough said.
“As a general rule of thumb, first- homebuyers will need some savings — usually at least 5 per cent of your home’s purchase price, ” she said.
“You contribution may come from saved funds, investments, gifts, concessions and government grants for which you may be eligible including the First Home Owners Grant.”
Ms Darnbrough also noted that extra funds for moving house, new appliances and decorating should also be budgeted for.
7. WHEN PLACING AN OFFER
Mark Hay Realty principal Mark Hay said buyers should ask a selling agent how long a property had been listed for. They should also check if there had been any price adjustments or agent changes during this time.
“A long time on the market can mean more favourable purchasing power, ” he said.
Knowing the motivation of the seller and what the vendor would prefer in relation to the sale, regarding delayed settlements, early possession or rent-backs for example, could also help to negotiate a better deal.
He said before making any offer, check the Certificate of Title for any caveats, easements or notifications, which could highlight any upcoming changes in the area.
“Failure to understand these completely can cause huge problems or devalue your purchase, ” Mr Hay said.
Check the Certificate of Title for any caveats, easements or notifications before making an offer: they could show any upcoming changes.
8. STRATA CHECKS
When buying a strata property, Mr Hay said it was important for buyers to look into the strata company’s current financials and the most recent annual general meeting minutes to uncover any anomalies.
“Also make sure you sign for all the documents including the strata plan, which clearly shows your parking space, balcony, storeroom and courtyard, ” he said.
“Failure to do so can mean you find you don’t own what you thought you did.”
9. DO YOUR HOMEWORK
Researching market trends, median prices and capital growth potential may be second nature for some, but it may cause confusion for others, Mr Percudani said.
Either way, it was vital to do market research before entering the market.
“It is vitally important to do market research to assess whether your financial capacity fits the lifestyle and geographic criteria you’ve already set, ” Mr Percudani said.
“If there is an imbalance, consider making concessions and adjust your expectations.”
He said interpreting market information can be tricky so if in doubt, speak to a professional.
10. BUY AS IF YOU'RE A SELLER
Buyers need to look at where they want to live and what lifestyle they want to lead, relative to the likely period of ownership, Realmark managing director John Percudani said.
“Most occupants sell after five to seven years as the natural tendency to ‘buy up’ takes hold, ” he said.
“With this in mind, assume you’re going to live in your house for around this amount of time and choose a property accordingly.”
For some, Mr Percudani said this would mean buying an inner-city apartment while for others it could be a house-and-land package in the outer suburbs.
“You make the most gains when you buy, so buy as if you will be a future seller, ” he said.
© The West Australian
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