From search to settlement: 11 steps to buying a house

Homeownership is still considered the ‘Great Australian Dream’, no matter how challenging achieving that dream may appear.

While rising house prices have made the journey an uphill battle for many, plenty of Aussies hold high hopes of buying a place of their own.

If you’ve got your deposit, or perhaps you’ve secured a guarantor, and you’re anticipating your next step will be onto the property market, congratulations. You’ve already done much of the hard work, but the actual journey has only just begun.

Buying a house involves a lot of planning and effort, particularly if you want to get the best deal possible (and who doesn’t want that?). 

Your home may be the biggest investment you will ever make in your life, so it's important you start things right. 

These 11 steps to purchasing a house in Australia could help you buy better, sooner rather than later.

Step 1: Determine your budget 

The first thing you must do before buying a property is assess your budget. 

This involves a little introspection. Take a long, hard look at your habits and finances to determine what your financial future holds and how much you can afford in ongoing mortgage repayments.

The most important factor to consider here is your current income and expenses. However, it could also be worth considering where your career is headed, whether any salary increases are likely, or if you’re planning on taking time off in the not-so-distant future. You might have some big travel plans, a potential career change, or fantasies of starting a family to factor in.

All this will determine how much you might be willing to borrow in order to buy a house, and therefore, which houses you might consider purchasing.

But the top end of a buyer’s budget isn’t always theirs to choose. A bank or lender will assess a homebuyer’s financial situation and determine how much it’s willing to loan them. That amount is a person’s ‘borrowing power’, and a buyer generally can’t borrow more than their borrowing power allows. Thus, they probably can’t spend more than their deposit and borrowing power combined.

Get an estimate of your borrowing power using Your Mortgage’s borrowing power calculator

Step 2: Check for government grants and incentives

If you’re buying your first home, you haven’t owned property in a while, or you’re planning to live in the property you’re buying, you might be eligible for a government grant, scheme, or stamp duty discount.

First home owner grants

First home buyers might be able to make use of a grant from their state government. Most state and territory governments, including those of NSW, Victoria, and Queensland, offer grants of up to $30,000 for first home buyers purchasing certain types of housing. That cash could bolster your deposit, help you furnish your new pad, or even afford you a holiday to celebrate. 

Home Guarantee Scheme & Help to Buy scheme

The Home Guarantee Scheme and the Help to Buy Scheme are also worth mentioning. 

The former sees the Federal Government act like a guarantor for up to 18% of a property’s purchase price, allowing eligible buyers to enter the market with a deposit of 2% to 5% without paying Lenders Mortgage Insurance (LMI). 

The latter is a shared equity scheme, with the Federal Government to chip in up to 40% of the purchase price of a property in exchange for an equivalent equity stake.

Stamp duty discounts

First home buyers and owner-occupiers might also be able to realise stamp duty discounts.  Various states and territories offer stamp duty discounts to certain buyers. Stamp duty can add up to tens of thousands of dollars, so a discount could be a valuable thing.

Step 3: Get pre-approved for a home loan

After determining how much you wish to – or can – borrow to buy a home, now’s the time to apply for pre-approval from a home loan lender. 

This step actually involves several smaller steps. But there’s no need to panic. Each step is an easy one to make and will get you closer to your home owning dreams.

First, shop around for home loan deals

If you’re working with a mortgage broker, this step will be very straightforward. After all, it’s their job to find you a home loan! 

Be warned, however, that mortgage brokers only have access to a portion of the market. They might not be able to offer you the most competitive deal you’re eligible for, meaning you could end up spending more each week, fortnight, or month than you need to.

If you’re researching on your own, exploring the mortgage market is as easy as perusing Your Mortgage. We bring together home loans from dozens of lenders so you can compare all your options in one, easily accessible place. 

In fact, you can find some of the best deals available on the market on the table below.

Important Information and Comparison Rate Warning

Next, choose a home loan

Typically, a borrower would do well to secure the lowest-rate home loan they’re eligible for that also offers the features they want. 

Features, like an offset account, redraw facility, or fixed interest rate, can make a big difference to a homeowner’s finances, so consider carefully whether any might benefit you. 

If you’ve found one or two (or more) that could be handy, consider if they come at an extra cost and, if they do, whether that cost is worth it.

It could also be worth looking out for home loan cash back deals. Some lenders promise thousands of dollars to borrowers simply for signing or refinancing to them. That extra cash could save you in interest or give you a bit of breathing room during a typically expensive period of time.

Finally, apply for home loan pre-approval

By offering home loan pre-approval, a bank or lender is essentially telling you that it’s willing to provide you with a mortgage if you wish to buy.

By getting this preliminary tick of approval, a homebuyer can feel more certain in their home loan prospects, will likely be taken more seriously by real estate agents, and can move quickly to send an offer when the time comes. 

A pre-approval will let you know how much you can borrow and the terms under which you’re borrowing. It’s based on your financial situation at the time of application and is generally valid for three to six months.

However, it’s not a promise. A lender can decline your home loan application even if it’s previously granted you pre-approval. 

Step 4: Research the property market

The next step is to do your research on the property market where you’re hoping to buy, and do it well. 

Chances are, no matter where you’re looking or what you’re looking for, you’ll need to submit an offer or bid in order to purchase. 

That offer or bid should be backed by a thorough understanding of the market, lest it otherwise be binned by a seller who thinks their house is worth more or greedily accepted as you’ve shot too high.

If all this sounds too tricky and you’re willing to pay more in order to avoid it, it could be worth engaging a buyer’s agent to help you buy your dream home.

Step 5: Find your new home 

Now that you know your budget, you understand your desired area and housing needs, and you’re ready to move quickly when the perfect abode appears, it's time to start keeping a closer eye on real estate platforms and attending open homes.

Once you’ve settled on an area or suburb, you could also choose to tell a few real estate agents you’re in the market and what you are looking for. After all, they’re on the ground every day and might know in advance if your dream home is about to be listed for sale.

Step 6: Make an offer 

Pop the champagne, you’ve found your dream home! Now, it's time to make your move. 

It’s important to be cautious when approaching price negotiations, but don't be too inflexible. After all, you want this property. In the same breath, many buyers miss out on the first home they make an offer for, and plenty miss out on their second, third, and fourth property too. 

Don’t be too disheartened if this happens to you. Buying property, particularly if your budget is strict or the market is tight (or both), can be tough, but the right place will come along.

There are two main types of offer a buyer can put on a home: a private offer and a bid at auction.

Private sale 

A private sale involves a buyer and seller negotiating directly with each other. The buyer will submit an offer for the property, and the seller will choose whether to accept, decline, or negotiate based on that offer.

While private sales give a buyer more time to contemplate than an auction does, the process is also less straightforward. A seller could receive multiple offers, and a potential buyer won’t know what each contains. This could mean that the buyer might offer far more than necessary to secure the property or their initial offer could be too low, causing them to miss out on the opportunity to negotiate.

It’s important that a buyer is across the market and understands roughly what similar properties in the area go for in order to put forward a reasonable offer. 

It’s also worth considering whether you wish to add any conditions to your offer. For instance, you might make it conditional on finance, as well as on a positive building and pest inspection. By instituting such conditions, a buyer can pull out of the sale if they can’t get a home loan or if anything nasty is found during inspections.

Auction 

Bidding at auction is a different beast entirely. 

It sees buyers – sometimes dozens of them – come together to bid what they believe the property is worth. 

While this can be stressful, it’s also a fast and open process. Though, buyers going to auction should be aware of two things: 

1. If you place a winning bid, you’ll be obligated to pay up

2. Auctions are notoriously competitive and many a bidder has been caught bidding more than they can afford 

If you’re going to bid at an auction, it’s critical that you’re sure your bank or lender will finance your particular purchase. 

Many lenders restrict what properties they will finance, with some refusing to provide loans for the purchase of small apartments, large acreage, or properties in need of major repairs, for instance.

If you bid and win, you’ll likely have to pay a hefty deposit before you walk away. If you do so and later can’t pay the remaining balance, you could lose that deposit. You could even be sued by the seller, who missed out on a sale due to your inability to pay.

That’s why it’s so important that you don’t place a bid unless you’re confident you can scrape the cash together, and that you don’t bid higher than your maximum spending limit.

Step 7: Get a building and pest inspection

Once you’ve found the right home, it’s time to do the (sometimes literal) dirty work. 

Building and pest inspections can be crucial. You don’t want to buy a home only to find it’s plagued by expensive issues that are now your problem.

While some properties going to auction will have already undergone a building a pest inspection, which is provided to prospective bidders, most being sold privately won’t have.

Buyers are typically on the hook for building and pest inspections, and it’s generally the price paid for peace of mind. If a property houses hidden nasties, like damp, shifting foundations, faulty wiring, plumbing problems, or termites, it’s vital you know about it before you buy.

Step 8: Consider the legalities

If you’ve made it to this point of the property purchasing process, take respite in the fact you’re on the home stretch. Most of what’s left to do is paperwork.

Now is the time to reach out to professionals. Buying a house or apartment is a complicated process and involves liaising with lenders, sellers, and even the government.

You might wish to enlist a lawyer to make sure all contracts are in order.

You’ll also likely need a conveyancer or solicitor to help you actually transfer the property into your name. The process of doing so is called conveyancing.

Depending on where you live, you might be able to DIY your conveyancing, but do so with caution. A slight mistake could cause trouble or even delay the sale, which could, in worst-case scenarios, see you forfeit your deposit. 

Step 9: Secure your financing 

Amidst the conveyancing process, you’ll likely also be liaising with your lender to get the final tick of approval on your home loan. 

This might involve getting a home appraisal, as your lender may wish to make sure you’re not paying more than the property’s worth. These days, some lenders conduct virtual appraisals. Though, a physical walkthrough might still be necessary.  

You might also need to provide more documentation verifying your identification, income, and expenses. 

Ultimately, the goal is to ensure your lender is ready to hand over the money you’re borrowing to the seller on settlement day.

Step 10: Wait for settlement 

Now, you can now take a deep breath, relax, and wait for your property purchase to be settled.

For the next couple of weeks, sometimes less, sometimes more, your conveyancer or solicitor will make enquiries about the property. 

Survey and drainage diagrams will be examined, government departments will be written to, heritage orders will be inspected, and council checks will be performed. In other words, the work will probably be out of your hands.  

This is the time when buyers and sellers usually get jittery. Buyers will probably have their fingers crossed that everything about the property is dandy and the process will run according to schedule, while sellers will likely hope the sale goes ahead so they can get their hands on the promised cash. 

On settlement day, you or your representative will meet with the seller or their representative to swap your cheque for their title of ownership. If you’re buying with the help of a home loan, that title will be quickly passed to your lender.

Step 11: Enjoy the feeling!

Congratulations! You’re the proud owner of your new home and have officially broken into the housing market. 

Buying your first home is a major achievement. And while mistakes will likely have been made and lessons learnt, isn't that what life is all about? 

What’s next for you? Maybe you can start planning to purchase your first investment property! 

This article was originally written by Michael Mata and updated by Brooke Cooper on 26 June 2024.

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