Ep18: Step by step guide on how to Buy a House.

Bringing a mate that has no FID during the open for inspection that lasts for 5 minutes and going through the cupboards, it's not gonna help you.

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Welcome to the Home Loan Insider.

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I'm Max Lending, your industry insider, and we're lifting the lid on the finance market, guiding you on how to cut through the jargon, manage your finances and get investing into the property market.

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As Flo Rider put it, welcome to your house and welcome to a step-by-step guide of buying a house.

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Good morning, good afternoon and good evening, everybody.

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Whenever you are listening to this, when your heart desires.

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Thanks for joining us for another episode.

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We've got a really good one for you today.

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It's the complete step-by-step guide on how to buy a house.

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I'm getting a lot of emails from you guys asking questions, so I thought, why not just cover this off in a podcast?

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Basically, I've been receiving emails in a roundabout way asking for a step-by-step guide in the process of buying.

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So whether you're a first home buyer, investor, or looking to upgrade, this is a must listen episode.

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So get that cup of coffee.

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Get into your comfy undies and let's get stuck into it.

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First things first, let's talk about your savings.

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A lot of people don't like to talk about this, but before you even think about buying a house, you need to see how much you have saved up.

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Do you have enough to cover the deposit, stamp duty, and a small buffer to meet the first few mortgage repayments?

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If your savings are lacking, I'm sorry, but stop there.

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You're not ready.

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You're still at the budgeting phase.

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You're not even at step one yet.

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I know that sounded harsh, but it's reality.

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I'm not here to fluff you.

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I'd rather give you guys the actual truth than say, oh, we can all afford a house.

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Let's all be friends.

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You come in our minds tonight and play Provo.

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Depends.

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Will your friend, the footballer be there?

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Our friend.

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Football friend.

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Best friends forever and ever.

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Oh, friend.

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Sorry.

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Got carried away there.

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Such good show.

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OK, back to it.

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If you have too much consumer debt like credit cards, personal loans, you need to sort first.

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Your savings will largely determine the price range of the home that you can afford, as you need at least 5% deposit and enough to cover the stamp duty.

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This leads us to the next big determinant of what house you can afford, and that's my favourite, your borrowing capacity.

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If you want to call these actual steps, let's call step one check your savings.

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Step 2, we'll call what?

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Understanding your borrowing capacity.

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That sounds good.

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Now, in the theme of putting things bluntly, your borrowing capacity is pretty much telling you what the hell you can afford.

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You can't guesstimate this figure.

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You can't ask your mate.

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You need to use an actual proper borrowing calculator.

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Each bank's online one that they have on their website, that's totally wrong and way overestimates your capacity.

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It's only job is actually just to get you through the door to speak to them.

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If they really told you what you could borrow, no one would speak to the banks.

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Luckily though, the Weekend Investor has you covered.

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Just go to our website and download your free borrowing calculator from there.

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It's a very close estimate to what you can actually borrow and the link is going to be in the podcast description if you haven't already got it.

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You need a proper tool like this to really put into perspective what you can afford and what the monthly repayments will be.

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Without it, you're going blind.

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Step three, let's call it research, research, research, research.

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You need to investigate the area that you want to buy in.

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What's the average two-bedroom house versus the three-bedroom house price?

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Knowing the areas you want to buy in, this is essential.

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Each suburb has their own special micro market.

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Now let's put this in perspective.

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Let's say that there are two identical houses located, what, 2 streets away from each other in the same suburb.

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They could have up to $200,000 difference in price purely based on their location.

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One could be next to a train line which smashes house values due to the goddamn train coming past every 15 minutes.

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Or the street could be used as a cut through Rd.

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after work which sees hundreds of cars drive by just to avoid the traffic.

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We all do it, but that unfortunately devalues the houses in that street.

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The other could be a Monet picturesque landscape or streetscape to put it other words.

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And that could have no traffic at all.

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And that would add a lot of value to your property.

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Step 4, get your finances in order.

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I cannot tell you how many times people have gone out there and they've bought a house thinking that they could just afford it.

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And then when it comes down to it, they couldn't afford the loan at all and they lose their deposit.

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It's a joke how many times this happens before you hit the auctions.

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It's crucial you get your finances sorted.

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Even though you may have done a borrowing power calculator, each bank has different criteria.

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Some banks they're not friendly towards, say, self-employed clients or people who have a lot of overtime and allowances.

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They may treat that income really harshly, while others they can be super lenient towards self-employed borrowers and just need like minimal documentation.

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How do you get your finances in place, you ask?

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Well, you start with a pre-approval.

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There are two types of pre-approvals out there.

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There's a system assessed pre-approval and a fully assessed pre-approval.

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System assessed is basically a computer just looking through the numbers that you've inputted into the system and they spit out a pre-approval for you.

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It's not worth the paper it's written on.

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Basically, it means nothing is actually being looked at.

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No one is physically looking at your pay slips or any actual figures.

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A fully assessed pre-approval though is just that, fully assessed by the bank.

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So you know that your pre-approval after being fully assessed is good to go.

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You do need to note though that not all banks do fully assessed pre-approvals.

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OK, so you need to check with them first if it's something they offer.

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Also, I forgot to mention that fully assessed pre-approvals are free.

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The banks do not charge for them.

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So there is absolutely no excuse for you to be able to get one.

06:43

Hey guys, sorry to interrupt your regular listening.

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We're just going on a small intermission.

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If you're enjoying today's episode, we have many more just like it.

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I would recommend Eisode 13.

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What's a credit score and how will it affect me?

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And episode 15, your complete guide to the first homeowner's grants.

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That's intermission over, now back to the show.

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A bit of insider information here.

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Each bank has a target clientele that they have different lending policies for.

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It's not all about interest rate, okay?

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One bank, they might have the lowest interest rate out there, but they won't lend to you.

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As you might be on a visa, or maybe you've just started a new job and the bank requires you to be in that job for six months before they can start lending to you.

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So you need to get interest rate out of your head and 1st see which banks will lend to you.

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And then from there you can choose who's got the better rate.

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Now I understand right now you're probably thinking, well Max, how the hell am I going to navigate all of this?

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Well, this is where mortgage brokers come into play.

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Mortgage brokers make up 73% of all home loan applications in Australia.

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And their job is to find a suitable bank for you.

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Great thing is they don't cost anything as the bank pays them when they submit the loan to the bank.

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But please, please do your research on which mortgage broker to use.

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Interview them first.

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Not all mortgage brokers are the same.

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A lot of them, I'm sorry, but they have absolutely no clue what they're doing.

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If you're talking to a broker, ask them how long have you been a mortgage broker for or how long have you been in the finance industry for?

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What did you do as a job prior to this job and being a broker?

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There are so many people who are becoming mortgage brokers these days and they've never worked a day in finance in their life and they don't fully understand how to structure deals correctly.

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Most likely this purchase that you're about to do.

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Is going to be the biggest asset of your life.

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So don't let some numbnut who worked at JB Hi-fi beforehand, who is now a mortgage broker, handle your transaction.

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Best way to actually know if they're going to be qualified enough to even start talking to you about your transaction?

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Ask them, do you own any property?

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If the answer is no, then what the hell are they doing talking to you about your biggest purchase?

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If you want to contact us via our website, feel free to do so.

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We can have a confidential conversation and we can refer a few suitable mortgage brokers that we have tried and tested over the years and can verify that they're going to be suitable for you.

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Step five, inspect the property.

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Pretty simple here, but this is actually one of the most important steps as well.

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Once you have your finance in place and you've found a potential property that you like, it's time to inspect the property.

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Request a contract of sale by the agent and go through the Section 32 document specifically.

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What's the Section 32 you're asking?

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It's basically a mandatory document that has everything you need to know about that property in it.

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And if you're serious about buying a particular property, don't skip out on the building inspection.

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It will cost approximately $550, but it's money well spent.

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The building inspection will let you know a myriad of information, such as potential structural or non structural issues the property may have.

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You do this because you want to know what you're getting yourself into and any commitments that you're going to have to have after buying the property.

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Bringing a mate that has no FID during the open for inspection that lasts for 5 minutes and going through the cupboards, it's not going to help you.

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Step six.

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Now this one's a bit of a pro tip.

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Consider a buyer's agent.

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If you can afford it, think about hiring a buyer's agent.

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Their fees usually around about 2 1/2% of the purchase price, which might sound like a lot, but they can actually help you find some off market opportunities and find quality blue chip assets.

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40% of all properties are now sold off market, which means they don't go to auction at all and they've never hit domain or realestate.com.

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So you will never have known that they'll ever for sale.

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If you don't have the money for a buyer's agent, that's fine.

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I'll suggest to go introduce yourself to a few real estate agent companies out there and they can let you know if they have any off market opportunities once they come available.

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And last step, after you've made an offer, it's settled and all the paperwork's signed and you've got the keys in your hand, you can sit back and panic.

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That's all right.

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You've got a mortgage now, and that can be a scary thing.

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But remember, it's a big step, but it's an exciting one.

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You're officially a homeowner, and how good is that going to feel?

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You can be crushed with crippling debt.

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All right, all right, I'm joking, joking, joking.

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If you've done your homework and you've bought something that you know you can afford, then you can sit back and actually have that Scotch or rose for the ladies and be proud of what you've achieved.

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Knowing that you've bought a good quality blue chip asset allows you to be confident that the asset's going to increase and appreciate in time.

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I've been in this industry for a long time, and take my word for it when I say that you need to be unemotional about the whole process.

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Buying property is an investment into an asset class, and that's the way you should think about it.

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Do your research.

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Find the right areas and don't over commit.

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There is no point putting so much money into an asset class and having no idea what you're doing.

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Get the right team around you and you'll be laughing.

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Thanks again everyone for tuning in.

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Don't forget to subscribe and share the episode to anyone you might think it'll be helpful for.

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And like always, you stay classy and I'll see you at the next one.

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If you have a question that you would like answered on the show.

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About budgeting, mortgages or finance, then drop us a line either via our socials, e-mail or website.

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Details available in the show notes.

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Any opinions and views expressed in this program are just that opinions.

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All information is general in nature and should not be seen as financial, economic, legal, investment, accounting or tax advice.

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This program makes no representation or warranty as to the accuracy or completeness of any information contained in this program.

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You should consult a professional advisor in relation to your own personal circumstances.