First home buyer's guide

A step-by-step guide to buying a house in Australia
Dawn Teh
Written by
Dawn Teh
Imogen Baxter
Reviewed by
Imogen Baxter
Last updated
February 12, 2024
0 minute read
Table of contents
First home buyer's guide

Buying your dream home can be a rewarding and fulfilling experience. But there's a lot to think about, and it can be difficult to know where to start — especially if this is your first time.

That's why we've put together this comprehensive guide for first-home buyers.

It will take you through all the steps involved in buying your Australian home — from saving for a deposit to finding the right loan and moving in. So let's get started!

Budget and determining borrowing capacity

Before you even start looking at homes, one of the first things you'll need to do is do your own due diligence and figure out your home-buying budget.

Remember, there are a lot of hidden upfront costs associated with purchasing a home. So don't only think about whether you can afford the deposit. Additional fees can add up to tens of thousands of dollars.

When you calculate upfront costs, don't forget to include:

  • Stamp duty
  • Legal and conveyancing fees
  • Building inspections
  • Mortgage registration or establishment fees
  • Council Rates
  • Home and contents Insurance

There are home loan buying power and stamp duty calculators that can give you an estimate of the costs associated with buying a home.

Next, don't forget to think about your finances after you've bought a house as there will be ongoing costs. Will you be able to manage mortgage repayments, property taxes, insurance, and maintenance on top of your regular expenses? You'll also want to account for any potential unexpected costs, such as repairs or replacements.

Once you have a good understanding of your financial situation, you can start to determine how much you can afford to borrow. You want to ensure that you can comfortably make your payments and still have money left over for other expenses.

Lastly, don't forget to research whether it's generally a good time to buy a home. One thing to do is check interest rates and compare them to recent historical averages. See if prices in your desired area are rising or falling. If they're on the rise, you may want to wait to buy until they level off or start falling again.

If you're planning on buying a home to live in for the long term (rather than as an investment property), these fluctuations might not be so important.

But it's still helpful to know about the general property market so you can make the best decision about whether to buy now or wait.

Save for a deposit

Next, you'll need to start saving up for a deposit. In Australia, the usual deposit is 20% of the purchase price. So if you're looking at houses around the $500,000 mark, you'll need to save up at least $100,000.

Bear in mind that if you are only able to put up a deposit that's less than 20% of the property's value, you may be required to pay Lenders Mortgage Insurance (LMI).

LMI is insurance that protects the lender if you default on your home loan. It's normally required if you are borrowing more than 80% of the property value. The premium for LMI is typically paid upfront, and it can add thousands of dollars to the cost of your home loan.

If saving up for a 20% deposit sounds daunting, there are many low deposit options and various government schemes you can consider.

With an OwnHome Deposit Boost Loan, we loan you the 20% deposit for a 2%* upfront fee. So you can get into a house now, without hundreds of thousands of dollars upfront.

Can you afford mortgage repayments but not the deposit? Learn more about a deposit boost loan.
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Find the right home loan and get pre-approval

Before you start house hunting officially, it can be helpful to research which type of loan is right for you. And also to get pre-approval for your mortgage. OwnHome's Deposit Boost Loan pairs with any primary home loan that you qualify for.

Some things to consider when shopping for a home loan include interest rates (see their offers on fixed and variable rates), loan terms, loan features, and other fees.

Home loan pre-approval means that a lender has done a preliminary assessment of your financial situation and agreed to lend you a certain amount of money, but it's not officially approved yet.  

This can give you peace of mind when bidding at an auction or negotiating with a real estate agent, as you'll know exactly how much money you have to spend.

In order to get pre-approval, you'll need to fill out an application form and provide information about your financial status.

The lender will then assess your application and decide whether or not to offer you pre-approval. If you're approved, you'll be given a letter of offer that outlines the terms and conditions of the loan.

Start home shopping

Once you have an idea of what your budget is like, you can start looking at the type of homes and neighbourhoods that you love.

Think about what kind of lifestyle you want and what sort of amenities are important to you. Once you've narrowed down your search area, start browsing homes online and visiting open homes.

It's also a good idea to get in touch with local real estate agents who can provide insights into different neighbourhoods.

One of the best ways to assess whether a property is a good price is to look at previous sales in the area. This will give you an idea of how much the property is worth and whether the current asking price is in line with other similar properties. You can also look at trends in the local housing market to get an idea of where prices are headed.

While it's not necessary, some people also consult a buyer's agent to help them through the process. In contrast to real estate agents, buyer's agents only have the buyer's interest at heart and they can help you with negotiations and other areas of the process.

At OwnHome, every customer has access to our expert team of Buyer’s Agents. We know that purchasing a house can be full of anxiety, especially for first-home buyers. We support you through every step of the home buying journey, from house-hunting to conveyancing to settlement. Let us take care of all the little things so you can enjoy the process and find your dream home.

Apply for a home loan

The next step is to secure your home loan. If you've already obtained pre-approval, this should be straightforward.

Once you've found the right loan for you, the next step is to fill out an application. This will usually include some basic information about your finances and employment history.

You will need to gather all of the necessary documents, including your tax returns, savings account statements, pay slips, and credit card history.

Your mortgage provider will also conduct their own property valuation to determine how much to lend you.

The lender will then use all this information to determine whether or not you qualify for the loan.

Arrange inspections

One of the most important things to do before buying a home is to have it inspected. This will help to ensure that there are no hidden problems that could end up costing you a lot of money down the road.

There are generally two types of inspections that you will want to have done: a general building inspection and a pest inspection. A general home inspection will assess the condition of the home's structural features including plumbing, walls, and roofing. On the other hand, a pest inspection will look for signs of termites and other pests.

It's important to hire a professional inspector for both types of inspections in order to get an accurate assessment.

Use an inspection checklist when you visit a home to ensure you're not missing anything important.

Make an offer

If you've found a property that you're interested in, it's time to make an offer! There are several ways to buy your property — through a private treaty (private sale) or auction.

A private treaty is when you and the seller agree on a price through negotiations, while an auction is when buyers compete against each other by bidding to purchase the property.

If you're going through a private treaty sale, you will negotiate the price with the seller. Remember to do your research about price ranges for the area before you begin negotiations.

After that, you will put in your official offer in writing.

Your real estate agent may ask you to make an initial deposit to show your interest in the property. This doesn't officially secure the property and is refundable if you change your mind because you haven't exchanged contracts with the seller yet.

Exchange contracts

When your loan is approved, and all other inspections have been completed, the next step is the exchange of contracts along with paying the agreed deposit amount. This is the legal process of transferring ownership of the property from the seller to the buyer and is also the start of the settlement period.  

Note that in some states, the exchange of contracts may be done earlier but with a "subject to finance approval" clause. This allows the buyer to get formal home loan application approval after the exchange of contracts has taken place.  

Depending on your state, there will also usually be a cooling-off period of about 5 days after you've exchanged contracts. During this time, the buyer can cancel the contract. If this happens, there may also still be some financial penalty (which is calculated as a portion of the purchase price).

If you went down the auction route, there will be no cooling-off period.

Final inspection

In the days leading up to the settlement date, you should do one last inspection of the property to make sure that everything is still in order.

Settlement day

Settlement is when ownership of the property officially changes hands from seller to buyer. This usually takes place about six weeks after signing the contract of sale but can be longer or shorter depending on individual circumstances.

This is also when the final payment for a property is due. This payment is typically made by the buyer's bank or mortgage lender, and it includes the balance of the purchase price as well as any other taxes and fees that are due.

Once the payment has been made, the buyer will receive the keys to the property and officially become its new owner.

In most cases, settlement takes place entirely behind the scenes, with buyers and sellers never even meeting in person. Your conveyancer and the real estate agent will be the ones who will guide you through this process and assist with the paperwork.        

Move in!    

Now that everything is official, here comes the fun part — moving into your new home! Remember that you don't have to move in on settlement day itself. In fact, it might be wise to arrange for it a few days after settlement. This is just in case there are any issues with your funds being released or other paperwork.

Once your items are all in, you can start living your dream of being a homeowner.

Enjoy the home-buying process!

Homeownership is a dream for many people. And while the process of buying a home can sometimes be stressful, it can also be enjoyable as long as you take the time to prepare and get organised. Just remember to take things one step at a time and always seek professional advice when needed!

FAQs

When do I apply for the first home owner grant?

Each state has its own rules about when to apply for the first home owner grant. But generally, you must apply for it within a year from the settlement date. 

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Disclaimer
This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
References
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