What Should I Know Before Finding and Buying My First Home? – A Doctor’s Guide

RESEARCH THE PROPERTY AND THE AREA

Ideally, of course, you’ll want to buy in an area that suits your needs and lifestyle, for example, close to work or a direct transport link, schools or shops, or to parks and beaches.

It’s worth remembering that your first home is just a first step on the property ladder that can provide you with financial opportunities further down the track. You might find something that’s perfect for now and will also be a great investment for when you want to move on.

If you find an area and property that you like…  Visiting the property more than once and at different times of the day and days of the week (even if you don’t go in) will give you the full picture of street traffic, noise, and other environmental factors. Not getting the full picture on environmental factors can be an annoyance later on, but there are some specific things to watch for when you inspect the property itself that could seriously affect how much money the property will cost you in the long run.

If there are things that need fixing in the property, but otherwise it ticks all the boxes, you can ask if the vendor is willing to take care of those inclusive of the asking price, or will take a lower price to reflect the cost of necessary repairs.

If you do find a property you are keen on, it is always best to request a copy of the Section 32 for the property from the sales agent, as this will provide further details of the property. At this point in time, it is also best to engage a Conveyancer that will be able to assist with the property purchase.

Some things to look for that might entail hidden expenses:

1. Roof leaks and blocked or broken guttering. Visiting on a wet day is the best way to check for these, otherwise look for signs of water damage
2. Substantial cracks in interior or exterior walls – ask about these to see how long they’ve been there, and whether the vendor has had them checked
3. Leaking pipes or waterproofing – look out for damp patches on the other side of, or below, wet areas like bathrooms
4. Drainage and waste pipe problems – look at the property drawings to check where drains are and note whether there are any trees that may damage or block pipes
5. Roof damage – particularly look for broken or missing tiles, or signs that the roof needs repair or even replacement
6. Floor damage – if the property has wooden floors, rotting or damaged joists might be indicated by sagging boards; missing or broken boards could be hidden by carpet
7. Asbestos – look for asbestos roofing, sheds or extensions at older properties and especially for damage that may mean it would be safer to have them removed

HOW MUCH DO I NEED TO SAVE TO BUY A HOME?

The amount you can pay as a deposit on your home will reduce the amount of the purchase price you need to borrow. Generally, lenders will want you to pay 20% of the purchase price.

Saving for a deposit to buy your first home can be difficult when you’ve just completed a long course of medical study. You’re likely to have HECS/HELP, other debts and rent to pay, all of which makes saving enough for a 20% deposit that much harder.

But delaying your purchase until you have that 20% deposit may not always be the best move. Buying now could see you save on ever-increasing rent and in the right economic conditions, purchasing sooner might allow you to lock in a deal when interest rates are low, and you could even benefit from potential capital growth.

It is possible to borrow more than 80% of the purchase price, but most banks will usually charge you Lenders Mortgage Insurance (LMI). It’s not compulsory, but many lenders will require it as a condition of settlement. This is why it is always best to speak with a Lender that specialises in finance for Medical Professionals, as their offers ensure that you can borrow more than 80% finance and the LMI is waived.

Contrary to popular belief, LMI protects the lender – not you. If you were to default on your loan, LMI covers the lender for any shortfall in a mortgagee sale. LMI is an expensive extra cost, especially when you also have legal fees, stamp duty and other things to cover. For example, if you borrow 95% on a $350 000 property, LMI could cost you more than $8,000.

ADDITIONAL COSTS

Once you have worked out your deposit and borrowing capacity, you need to factor in other costs involved in buying a home:

1. Legal fees, such as conveyancing and land transfer registration
2. Stamp duty and other government costs. (Stamp duty varies between states and territories and is usually the biggest government cost)
3. Building and pest inspections
4. Strata searches if you are purchasing an apartment
5. Valuation and bank settlement fees
6. Mortgage Protection Insurance
7. Moving costs
8. Utility and telecommunications connection fees

HOW MUCH CAN YOU AFFORD TO BORROW?

You might have a ballpark figure on how much you will need to spend on the kind of property you want, in the area you want but it’s a good idea to begin by working out how much you can afford to borrow in the first place.

To estimate your borrowing capacity accurately, you need to consider what your total costs will be, the size of deposit you can afford and how much you can comfortably repay every fortnight or month.

A rough guide for calculating how much you can borrow is to multiply your gross income by four or five. How much a lender is prepared to offer based solely on your current income can, however, vary from lender to lender. Lenders will estimate your borrowing capacity based on factors such as your income, expenses, and debts and will factor in possible interest rate increases.

If you do find you are ready to buy a property, it is always best to seek a pre-approval from a Lender, so that you have a clear indication of the maximum that can be approved for you.

PRE-APPROVAL ON YOUR HOME LOAN

Getting a pre-approval on your loan allows you to look for your home with confidence. You will know how much you can borrow and can speed up the process when you find the right place and want to make an offer, which puts you in a better position to negotiate the purchase.

FIVE STEPS TO HOME LOAN APPROVAL

Getting your first home loan can be a daunting and confusing process, but if you apply for a home loan. Having a Home Loan Specialist will ensure they are able to assist and inform you of the whole process.

Step 1. Submit your application

Your Home Loan Specialist will take you through the application process, including the supporting documentation you need to present.

Step 2. Review the documentation

Once we have approved your application, we will send you the loan offer and other documents to review.

Step 3. Accepting your loan offer

Make sure you read the loan offer and other documents carefully. If you agree to the terms, you can sign these with your Home Loan Specialist. Do ensure that if you have any questions or are unsure of any parts that you clarify with your Specialist.

Step 4. Exchange information with other parties

Once your Specialist received your signed acceptance of the loan offer, they will exchange information with your legal representative (usually a conveyancer). When you are buying a property, your legal representative will contact us to book a

settlement date, and they will then advise you of that date.

Step 5. Settlement

The Lender will lodge the relevant documentation with the state/territory titles office on your behalf -(have the stamp duty and any other government fees paid at this time). The vendor’s legal representative will then inform the real estate agent to let you pick up the keys to your new property!

If you would like to speak to a Specialist that will be happy to assist you in buying your property, feel free to contact me.