What You Need to Know About Buying Your Next House

By Peter Sarmas on 13 Aug 2013
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Buying a house is one of the most complicated purchases you’ll ever make if you’ve never done it before.

Whether you’re planning on purchasing a new house or a new unit, it’s crucial you know what to expect of the process. If it’s your first time or it’s been a while since you’ve entered the property market, read on for a simple guide to understanding the complex process of buying a home.

Sorting Out Your Finance

First and foremost, before you start searching for your new home, you need to know how much you have to spend.

Your initial step should be seeking pre-approval from your lender so you understand how much money the banks will loan you. Remember, this amount is not set in stone. This is only a guide and you may not receive the full amount once you seek formal approval for finance.

After you have received an idea from your lender of how much you should be able to spend, consider additional costs like stamp duty paid to state revenue office, legal and conveyancer fees, loan application costs, land title transfer fee and mortgage registration fee.

You’ll also need to factor in what the process of moving into your new home will cost you, the cost of any repairs or renovations that will need to be done immediately, and any rates and utility connections. You should also consider Lenders Mortgage Insurance (LMI), which is an insurance that protects the lender in the event that you default on your home loan. It is paid as a once off insurance premium or fee when your loan is advanced and does not affect your interest rate. Some lenders will not grant mortgages without LMI.

Looking for the Right Home

With all of this in mind, it’s time to start looking for your new house! This part of the process can be a time consuming one, as you really need to give a lot of consideration to several different factors. What’s important to you in a suburb? Think about what neighbourhood you want to live in. What’s the level of traffic noise like? Check back at different times to find out. If you don’t drive, is there sufficient public transport in the area? Is it close to schools and a hospital? Restaurants and cafés? What about shops? These things will of course vary in importance from person to person depending on your needs, but it is well worth giving some strong consideration to.

Does the area fit into your budget? Different suburbs range hugely in price, and while one postcode may seem more desirable, you are likely to find a lower priced area in another suburb.

Highly sought-after areas do tend to retain their value, but if it’s the lifestyle you’re after, consider broadening the boundaries you are searching in. On the same note, you could consider a smaller property in a more desirable suburb – it all depends on what your priorities are and what type of property you are personally happy to live with, or what compromises you are prepared to make.

Now, the house itself. When going to inspections, most buyers want to choose the house they fall in love with first. While we’re not advising against this, we recommend giving some thought as to how old the house is and what repairs and renovations need to be done before you set yourself on one particular house.

Although this shouldn’t deter you, consider the costs. Are you willing to undertake the renovations and will you get the time and extra money? If you notice any signs of structural damage, take these into account but don’t let them put you off completely. Get them checked out by a professional building inspector.

Legally, the seller is not obliged to notify you of any quality defects in Victoria. If you find the property has structural damage once you have made the purchase, you won’t be entitled to any reimbursement. However, if you are prepared to go to the effort to make the repairs needed, you could land yourself a bargain and save yourself a substantial amount of money in the process.

Making an Offer

Once you think you have found your potential new home and have completed a thorough inspection, let the agent know you’re interested and have a solicitor or conveyancer examine the contract of sale. They will be able to find anything out of the ordinary and advise you whether the contract is in order.

Next up, the agent will want you to make on offer. Insist that your offer is in writing in a formal contract with a vendor statement (or an “S32”) – never enter into a verbal agreement.

Ensure that your contract includes all fixtures and fittings you wish to keep. A formal offer with a deposit shows that you are a genuine buyer and the vendor can see that your offer is serious. It serves as evidence that you have an offer in place and that you are currently negotiating the property. If your offer is accepted, you will then need to pay a 10 per cent deposit once the contract is signed by both parties. Then send the contract to your solicitor or conveyancer and seek approval for finance from your lender.

Formal Approval

After you have agreed on price, placed a deposit on a property and signed a contract of sale (the legal commitment to the purchase), you then apply for the formal approval from the bank.

However, before the bank will give you the funds, they need to carry out their own valuation on the house to ensure the value is worth the amount of money you are borrowing. They do this because if you default on your loan, they are then able to sell the house to reclaim their money. The problem is, if you commit to buying an overpriced house and then are unable to borrow the full amount of money from the lender, you could find yourself in very hot water. This is rare, but something you want to avoid at all costs, so it’s always a good idea before you sign the contract of sale to have the property valued by an independent valuer.

After receiving approval for finance, remember that in Victoria the purchase it is subject to a three day cooling off period for a private sale, but these conditions are different if you purchase the house at auction. Also if the contract is subject to finance or building conditions, these must be met before the sale becomes unconditional for a private sale.


Towards the end of the settlement period a settlement statement will be sent to the seller to complete. This notes the final amount owing on the property, as well as the adjustments for rates and taxes as at the date of settlement. At the end of your settlement period you will be required to make all final payments for the property, and all title documents will be transferred between the two parties.

Once the settlement has taken place, the process of buying a new home is complete and you will have finalised the purchase of your new home.

*Disclaimer: This guide is for general information only and should not be treated as legal advice. It should not be relied on when making any selling, purchasing or investment decisions.

About the Author

Peter Sarmas is a Certified Property Investment Advisor (PIAA) and Vendor/Buyer Advocate. Before becoming the founder of Street News, Peter completed a Degree in Applied Science (Chemistry) and a Graduate Diploma in Property Valuations (Hons). Peter believes property investing is a major and potentially risky undertaking. In his view, everyone should have an independent person acting on their behalf when seeking property investment advice.

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