I’ve recently spent time with my 20- something nieces and nephews and realised they know little about how to go about buying their first house. So, if you are 20-something (or 30-something or even 40-something!) and have a vague idea about stepping on the property ladder, here are a couple of directional arrows.
Start off by sorting out your credit history.
If you have accumulated a massive credit card debt or owe some unresolved student debt and are getting snarky letters, you will have to smooth some of that out. I’m not talking about legit HECS debt, but rather the mean emails that make you cringe. Just stop getting lattes and UBER eats, and pay your bills down. Or preferably, pay them off. And make saving a lifelong habit.
Talk to a financial person about your loan.
This might be changing imminently but in Australia, every sensible person goes to a mortgage broker. You don’t pay them anything (the bank does) and you should be able to find a better loan than you would on your own. They might also have an alternate loan source that you wouldn’t necessarily have explored. And don’t go to six different banks trying to see if you can beat them – every time your credit is checked there is a flag left on your credit history. If a bank sees you have tried to get a loan with five different financial institutions and are now trying theirs, you might find this reflects poorly for you. A mortgage broker will also be up to date with any governmental rebates or first home buyers grants available to you. This could save you tens of thousands of dollars.
Once you have a clue about how much you can borrow start to do some online research.
Don’t be precious about what suburb just yet, just spend some computer time and learn where you can and can’t afford. There is simply no point in setting your heart on the suburb your parents live in, if they have been climbing the property ladder for 45 years and have a mansion on the beach. Be flexible, be reasonable and think a bit about resale and future growth too. You don’t have to be a property guru to know this. If you are the only person in the world who would be okay living next to the city dump, you will probably find this doesn’t bode well for your future capital growth (or profit on the value of the property).
Search the ”sold” portion of the website you are using.
The For Sale section is really a ‘wish price’ for the seller. The Sold section is actual achieved prices. Not always the same thing and make sure you toggle to put the sales into recent date order. You want to see what sold two months ago, not in 2011.
When you have worked out what sort of area you are interested in, start to hit a LOT of open houses.
Real estate agents don’t care. If they have bothered to open the front door, you are welcome there. Just mention that you are early in your process, not yet qualified and doing some research. Real estate agents – despite the press – are generally helpful and useful sources for you.
Get into as many available properties as possible.
You must stand in the living room, check out the natural light, the location, the outside of the building if you are buying a strata or body corporate home (unit or townhouse). There are some things you CAN change (the grotty lino in the bathroom, the green paint in the hallway) and some things you simply cannot change (the big hill blocking all the sun through the winter, the roar of cars from the freeway). Start to get a feel for what is your non- negotiable, and what could be your compromise items. You have to kiss a lot of frogs before you find your handsome prince.
Be a bit flexible at this point.
Yes you may have to put in a new kitchen eventually, or redo the carpets but could you suck it up and live there to start with? And when you bring along your mother/best friend/ auntie to ask for their opinion, be mindful that they have not slogged through all the rotten apples so have nothing to compare it to. They think there are there to ‘be the voice of reason’ and I can’t tell you how many excited first-time home buyers get discouraged when their well-meaning cousin points out a hairline crack in the stucco outside and disparages the whole property. You will get a property inspector to tell you about the structure and any faults. You don’t need Aunt Hildas input.