Buying your first home: six steps to make it happen

Buying your first home can feel exciting and overwhelming in equal measure. There’s nothing quite like the experience – or the accomplishment.

A home purchase is a major investment. Understanding the home-buying process can empower your decision-making and help you feel more confident.

There are six key steps involved in purchasing a home. At DiJones, we’re here to help you get them right so you can make your home ownership dreams a reality. Let’s dive in.

Step 1: Financial planning

Financial planning is your first step. You need to know what you’re working with so you can be realistic about your buying power.

Ideally, this important part of the planning process should begin long before you enter the housing market. It’s a great place to get started.

Budgeting

Create a budget. Map your ingoing and outgoing expenses over a few months to better understand your spending habits and financial health.

What can you realistically afford to pay in mortgage repayments each month? How do you appear to lenders? Mortgage brokers don’t just help you find the best deal for your individual situation. They can also provide advice on your options and guidance for achieving your home ownership goals.

Once you have a budget and advice on buying your first home, now’s the time to get serious. Lenders look at your financials – tidy them up. Save as much as you can, clear debt, and be mindful of your spending.

Also, create a realistic budget that factors in ongoing home ownership costs. For example, research and include the cost of home and contents insurance, mortgage insurance (in case you are ill or injured and lose your income), and any council rates or strata fees.

Saving for a deposit

If you need time to save for a deposit, consider automating your savings account so you aren't tempted to lower the amount going into savings after each pay cycle.

How much will you need to save and what is your timeline? Be ruthless when you assess your spending. How much you can spend on your first home depends on how much you can save for a house deposit (or borrow from the bank of mum and dad).

First-home buyers are eligible for a range of government schemes and grants, including home deposit assistance and using superannuation to buy a house. These might make your goal of home ownership more achievable. Buying your first home may feel impossible, but home buyer assistance schemes can ease the burden. [1]

Getting pre-approved

Pre-approval is a solid step to show sellers that you are a serious and determined buyer; it also strengthens your position when you make offers because you're pre-approved for a loan.

There are different factors to consider when applying for a loan. Lenders will look at your debt-to-income ratio, your income, fixed outgoings, and credit score. It's always wise to keep tabs on your credit score to avoid any surprises. If you know your credit score, you can also take steps to improve it.

Step 2: Understanding the housing market

There are always larger trends at play in the housing market, but you also need to look at local trends in order to understand the property market.

Various factors influence the housing market and the price of homes. In addition to interest rates and inflation, there are certain seasonal trends to understand.

You also need to factor in local market conditions. If you're looking in an in-demand area that recently had an influx of residents because of a job boom, you're going to be in a competitive housing market where homes are selling well above the asking price.

An experienced real estate agent can help guide you through this, helping you understand when it's a buyer's market in your area and when it's not.

Related: Eight dos and don’ts for successful house hunting

Step 3: Finding the right property

This is the most exciting step in the process – house hunting for the home of your dreams.

Identifying your needs and wants

Here’s a fun bit of homework: imagine your perfect house. What factors are most important to you? Location? Layout? Number of bedrooms? Create a list of your must-haves.

Now, think about what you want. A modern kitchen? A garden? Proximity to a park or public transport? List these, as well.

Review your lists and prioritise them accordingly. This will give you a great foundation to start your property search.

Working with a real estate agent

A real estate agent is going to make everything easier. Seek out someone with experience, local knowledge, and a willingness to work with you. Ideally, you want someone who can be a resource to you throughout the process. Ask questions. Clarify how they can help you.

An agent should represent your best interests, find properties that meet your needs, handle negotiations, deal with inspection reports, and all the ins and outs. This is where their experience is invaluable.

Property search strategies

In addition to working with an approved agent who will highlight certain properties that meet your needs, you can also make use of online portals and apps. Houses hit the market daily, so set your filters and turn notifications on to ensure that you don't miss out.

If you want a competitive edge while looking for listings, be sure to check out our Exclusive Preview service. Here, we showcase properties to an exclusive audience before traditional marketing begins, allowing you to stay ahead of the game.

Open houses are also a great opportunity to explore properties in person. You can usually explore on your own, which allows you to get a much better feel for the vibe, suitability, and condition of a home versus being led around by the seller's agent who will want to highlight the best bits and distract from weak points. (Make sure you still ask questions, though.)

Step 4: Making an offer

Once you find the perfect match, it's time to make an offer.

Understanding the offer process

This is where an agent can guide you, especially if you struggle with financial literacy. The agent will know your budget from the outset, and they can also advise you on what an attractive offer looks like because they understand the market and how comparable properties are moving in the area.

Your first offer may not be accepted, so you have to be prepared to negotiate for terms that please both of you. However, don't overstretch yourself. You might have to walk away if the seller asks for more than you budgeted.

Contingencies and conditions

Contingencies are there to protect your interests, allowing you to withdraw an offer if your set conditions aren't met. As a first-home buyer, you might not know the ins and outs, but an experienced agent can advise you. The most common conditions include financing, inspections, and appraisals.

Related: How much does a building inspection report cost?

Step 5: The home inspection

The home inspection is important, so much so that it's often part of the contingencies and conditions in a contract.

Key areas to inspect

When it comes to the actual inspection, there are key areas to look at, including building and site inspection, pest inspection and if you are purchasing a unit, townhouses or villas and they are part of a strata scheme, it’s a good idea to request a strata report, too. Ultimately, the purpose of an inspection is to identify issues with critical systems because they are the biggest risk to your investment.

Hiring a home inspector

Always work with an inspector who is credentialed and has positive reviews. Your real estate agent may be able to recommend a reputable inspector; otherwise, speak to recent home buyers about who they used.

Related: Guide to buying a house or an apartment in NSW

Step 6: The settlement process

Now comes the exciting (and nerve-wracking) part: the settlement period is upon you.

Securing financing

Work with your lender to finalise your mortgage loan, ensuring the financing is secure and the relevant paperwork is complete. There shouldn't be any issues at this stage, but it's wise to be proactive.

Title search and insurance

Before you hand over thousands of dollars in your deposit fee, ensure your investment is protected. Carry out a title search to confirm the seller you're dealing with owns the property; to safeguard against future claims, invest in title insurance.

Settlement Costs and fees

There are settlement costs, so make sure you’re prepared for the fees, including solicitor or conveyancer, inspections, stamp duty (transfer duty), and appraisal costs. Factor these into your purchase price.

Transfer of ownership

The land registry will transfer the property title from the seller to you, the buyer. They will do this once you have completed the payment, paid stamp duty (transfer fee), signed the contracts, and received the keys. You don't need to do anything for this transfer of ownership to take place; your solicitor or conveyancer will handle it.

Related: What is property settlement and how long does it take?

Post-purchase considerations

Congratulations! You are officially a proud home owner. You’ve made it onto the property ladder with a place that is uniquely yours, and you’ve started paying off your mortgage.

Once you’ve enjoyed this huge accomplishment, start making plans to take care of your investment.

Home maintenance

It isn't enough to own a home; you need to ensure it remains in good condition so that it holds its value when it comes time for you to sell. Property investing might not be your plan, but owning a single property is the biggest investment you're likely to make. Ensure you stay on top of leaks, cracks, and electrical issues to avoid serious problems down the line.

Building equity

If you look after your home and invest in maintenance and upgrades, its value will increase. The value also increases naturally as you repay the mortgage and build equity. You can use this equity for various reasons, whether it's to buy an investment property, start a business, pay for your children's education, or retire.

Tax benefits

There are several potential tax benefits for homeowners. The first tax strategy is negative gearing, which investors often use to offset losses from rental properties.

They can claim expenses as a loss to reduce tax liability. Depreciation deductions are for a property's natural wear and tear, while Capital Gains Tax exemptions are geared at avoiding tax on the profit of a primary residence's sale.

You can also claim deductions on interest, gas, and electricity if you work from home. One of the greatest personal finance benefits is interest deductions. You may be able to claim a deduction for the interest you pay on your mortgage payments, which is often significant in the early years of repaying a loan.

Summing up

Buying a first home will go a lot more smoothly if you have a solid deposit amount, meet loan eligibility criteria, and have a quality real estate agent on your side. You may be eligible for a first homeowner's grant on top of a personal loan, but no matter your financial situation, first-home buyers need a skilled agent to navigate the process.

If you’re interested in buying your first home and want experienced, friendly advice, speak to us. We have decades of experience helping people realise their home ownership dreams. Please don’t hesitate to contact us.

FAQs

What is a good credit score for buying a home?

Every credit agency uses a different scale, but credit scores typically range between zero and 1,200. If you want to buy a home, your credit score should be at least 620.

A score above 750 is viewed as excellent and will make it easier to get a home loan and a decent interest rate. The higher the score, the less risk you pose to lenders, which can help you pay off your mortgage faster.

What are the different types of mortgages?

The most common loan options in Australia include variable, fixed-rate, and split-rate loans. A fixed-rate mortgage locks in the interest rate for an agreed period, so you can rely on predictable repayment amounts.

With variable rates, the interest rate will fluctuate with the market. This might swing in your favour, lowering repayment costs, but if the interest rate goes up, so will your mortgage payments.

A split-rate mortgage blends both, fixing a portion of the loan deposit amount while the remainder is variable. It's a loan that offers you both flexibility and stability.

Ensure you consider lenders' mortgage insurance and use a mortgage calculator for clarity. Consider working with a mortgage broker to learn more.

What is a home appraisal?

When a homeowner plans to sell their property, they enlist the services of approved agents to appraise their home's value. It's an essential part of the process for sellers, buyers, and lenders.

Buyers need to know the value of the home versus what the seller is asking for, and lenders need to understand whether the value and agreed purchase price align. Various factors influence an appraisal, including location, size, condition, and local property prices.

What is home insurance?

Every homeowner should have home and contents insurance to protect their investments. Home insurance protects your finances from loss and damage sustained to either the contents, structure, or both.

A standard insurance policy will usually cover storms, theft, fire, and similar natural disasters. It should also provide liability coverage in case someone is injured on your property. A homeowner’s insurance policy is often part of the mortgage agreement, and you will need to show proof of policy before the sale is settled.

How do I choose a real estate agent?

It's important to choose a real estate agent you can get along with. You want to feel at ease with them, and encouraged to ask questions. Also consider experience, reputation, and local market knowledge. You can read client reviews, ask questions about their track record, and even ask for personal recommendations.

It might seem daunting, but the right agent will make an effort to understand your needs and will keep you in the loop. They should be on your side, assisting you towards the purchase of your home. If that isn't how they make you feel, don't move forward with that agent.

Sources:

[1] Firsthome.gov - First Home Owner Grant. Sourced November 2024.