Around this time last year, I published an article about the “Great Australian Dream” and how difficult it is to achieve. Now here I am, writing about our experience and the steps that we took when we bought our first home in Australia late last year (2022). Who would’ve thought?
Just for a bit of context, we’re currently based in Queensland and the property that we bought is in Adelaide, SA. We’ve started with the process of buying our first real estate property in Australia around two years after we’ve moved here. Employment wise, both my husband and I work.
Please note that the information that I will be sharing below is only based on what we have experienced. Your journey may differ slightly depending on your own personal circumstances. Also, because there’s just so much to say about this topic, I will be posting a part 2 next month so keep an eye out for that.
Timeline
Figuring out what we want
We started off with figuring out what kind of house we wanted to get and will realistically be able to afford. So basically, the things that we had to consider during the decision making process are as follows:
- Location – We’ve considered many different places all across Australia and eventually decided on Adelaide, South Australia.
- Budget – Basically, we didn’t want to use all of our savings to buy a house. We carefully took into account our income vs. expenses and how much mortgage we’ll be comfortable paying off.
- Property Type – This is where you decide if you want a house, unit, townhouse or others. This was a no-brainer for us. We’ve always wanted our family home to be a freestanding house. Also, we opted for an already established property as opposed to a new build.
- What you want in a house – This is where you ask yourself things like your preferred house and land size, the number of bedrooms and bathrooms you’d require etc. Essentially, we were only aiming for a simple family home with a big enough backyard where our future kids could run around.
Saving money
Once you have figured out what you want, you should be able to have a rough idea of how much you need to save as far as deposit and other related expenses go. Good news is that you may be eligible for a government home buying scheme based on your own personal circumstances. This is something that you could do a little research on or simply ask your mortgage broker about. They should be able to give you advice as to the schemes available to you.
In our case however, we weren’t eligible for any of those first home buyer schemes for a couple of reasons including the fact that the property is an already established house and we were buying it as an investment property. So long story short, we tried to save as much money as we can by avoiding spending money on anything other than the essentials. It also helped that we didn’t have any loans so we were able to put a big chunk of what we earn into our savings. We didn’t really change our spending habits all that much as we’ve always lived pretty simply. We love our discounts and inexpensive stuff!
As I have mentioned above there are other costs that you have to prepare for when buying a house other than the deposit. These are:
- Stamp duty, if applicable (amount differs per state)
- Conveyancing and legal fees
- Building and pest inspection, if needed
- Loan Mortgage Insurance (LMI)
- Loan application fee
- Council and water rates
Some of those fees may be included in the loan. Your mortgage broker should be able to advise you.
Finding out our borrowing capacity
I found our mortgage broker through a Facebook group. We got in touch with him way before we had reached our savings goal because we wanted to know where we were at and what more we can do so the lenders will be more likely to approve our home loan application. After talking to the mortgage broker, we found out that we’ll actually be able to buy a property sooner than we initially thought we would.
Some of the things that we have discussed with our mortgage broker are as follows:
- The sort of property we were planning to buy
- Personal circumstances
- Finances (savings and how much of it we were willing to put down as deposit, assets, liabilities etc.)
He then worked out the loan amount we’ll most likely be approved for.
The mortgage broker that we used is Alex from Significant Financial Solutions. More information about him in part 2.
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Choosing a home loan and getting pre-approved
So we saved up a bit more and then when we felt like we were ready to start the process, we contacted our mortgage broker again. He presented us with different loan options/ products which would suit our needs. We’ve compared all of them based on the information that the mortgage broker had provided us and did a bit of our own research as well. If there was anything that we didn’t understand about the products (i.e. finance terms like redraw, off set etc.) we just asked our broker and he quickly explained them to us.
We then informed the mortgage broker of the home loan product that we have chosen and sent him the documentations that he asked us to send him for the pre-approval (e.g. IDs, payslips, tax return and bank account statements). The mortgage broker handled the whole application process. All we really had to do were to electronically sign documents and keep on working, of course. We received our pre-approval (valid for 4 months) not long after the application was submitted. That’s when we started to actively search for a house to purchase with the help of our buyer’s agent who was referred to us by our broker as we were looking for one.
Pre-approval vs. Formal approval
Two of the most common terms that you will come across quite often during the home buying process are “pre-approval” and “formal approval”. So what’s the difference?
Pre-approval (a.k.a conditional approval)
A pre-approval informs you of how much a lender has agreed (in principle) to lend you for the purchase of your home. Though receiving a pre-approval does mean that you’re most likely to have your home loan approved, it isn’t a guarantee. For example, if you fail to meet certain additional requirements, have unfavourable changes to your personal circumstances, or the property that you want has a negative valuation, then your pre-approval might not proceed to a formal approval.
Securing a pre-approval isn’t compulsory in the home buying process but I’d say that it seems to be “standard practice”. I highly suggest for anyone who’s wanting to secure a property to get a pre-approval for a number of reasons such as:
- You’ll know the exact maximum property price that you can afford.
- You’ll be able to make offers and bids more certainly and confidently.
- It is said that sellers find buyers with a pre-approval more attractive because it indicates that they are a serious buyer and their offer is less likely to be withdrawn due to lack of financing.
Formal Approval (a.k.a unconditional, full)
A formal approval is the lender’s final decision to approve you for the home loan. This is the one that you’d apply for once you’ve actually won a property in an auction or had your offer accepted. Getting your final approval means that the lender is happy to lend you a certain amount of money for a specific property after having formally assessed your documents and loan application.
House Hunting
Since we were buying interstate it would’ve been very tricky and more costly if we traveled to Adelaide all the way from Queensland every time there was a house that we were interested in buying. We knew that from the start and figured that the best way for us to go about this was to employ the services of a buyer’s agent. As previously mentioned, we were introduced to our buyer’s agent by our mortgage broker.
Once we got in touch with the buyer’s agent, we discussed with him the specifics of the property we were hoping for, the general area we’re looking at, our budget, and his professional fees. He’s also explained to us the process of searching for a property. We’ve then paid him a down payment (for his fees) and the search began.
The buyer’s agent would send us a list of properties which fit what we were going for. My husband and I would then filter through the list and choose the ones that we really liked. Our buyer’s agent went to house inspections for us to have a look at the property. He would usually send us videos of the property and let us know of anything that he saw in person that wasn’t visible in the ad photos.
The buyer’s agent that we used is Pan from SA Wealth Group. More information about him in part 2.
In my opinion, searching for a house was definitely the lengthiest, trickiest, and most emotionally exhausting part of the whole experience because of how competitive the market is. We’ve looked at, bid and made offers on so many houses for months. After an unsuccessful couple of months, we decided to apply for a pre-approval with a higher loan amount which our mortgage broker secured for us without any issues. Shortly after we got our new pre-approval, we managed to secure a property through an auction. We’ve done that, of course with the help of our buyer’s agent.
The real estate market here in Australia has become so competitive specially during and “post COVID”. There’s always someone who was willing to pay more than you could. Honestly, it was such an emotional roller coaster. You might find this silly but I really think that trying to find a house to buy is very comparable to trying to find love. You’ll find a house that you like then you get attached to it. Soon enough you’ll find yourself dreaming of your future that includes that house. You’ll imagine yourself living there and planning the changes you’d do with the place; only to find out later in the week that the seller accepted another offer or someone else’s bid was higher.
To be continued…
Well, that’s it for today. We’ll continue with our discussions in the part 2 where I’ll tell you all about the next steps that we took and the services that we have used throughout the whole process. The part 2 of this post will be published next month.
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Disclaimer All content and information in this post is for purposes of sharing my experiences only, does not constitute professional advice and does not establish any kind of professional-client relationship.
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