The 6 steps to completing a property purchase
Step 1: Determine your maximum borrowing amount
Borrowing power is the maximum amount a lender will let you borrow to finance your property purchase. Your borrowing power is determined by considering your income and financial commitments, as well as your current savings position and your credit history. You also need to consider your expected living expenses, so you can repay your loan and maintain a lifestyle you expect.
Naritas can arrange finance for up to 98% of the property value, however, you will typically need to show you have at least 5% of the property value in genuine savings. We will give you an indication of the amount you can borrow. We can also help you to calculate your loan repayments, how long it could take you to pay off the loan, as well as the loan amount based on a repayment amount entered.
Step 2: Determine the costs
Once you have arrived at an estimate of your potential purchase price, we will need to consider the other charges that will apply on the purchase. One of the biggest initial outlays you will have is the initial deposit, which is usually 10% of the purchase price. You should also allow additional funds (approximately 5%) for applicable taxes, stamp duty, legal costs, and insurance associated with purchasing a property.
We will help you determine all of the costs associated with purchasing or refinancing a property, and calculate the full amount needed to complete your property transaction.
Step 3: Determining which loan is best for you
Each loan has many different features and fees to be considered, such as home loan rates, mortgage offset accounts, redraw facilities, and ongoing fees to name a few, and there are different loans to suit different needs.
We can help make choosing a home loan easier by providing key information that will assist you in making a well-informed decision.
Step 4: Obtain conditional approval
Conditional approval from a lender means you are given approval ‘in principle’ (if you have fulfilled the lending criteria) for a loan prior to purchase. This means that you have an indication of how much you are able to borrow,have a realistic budget when you consider different properties. We can help you obtain this approval by submitting to the lender and application based on your current financial position and an estimated purchase price.
Step 5: Search for a property
When inspecting a property, take our inspection checklist with you to record the parts of the house that you like and dislike. It also gives you tips on what to look for, such as checking the water pressure.Once you have found a property you like – contact your Naritas broker for a copy of the RPdata Home & Suburb Report for that property.
Step 6: The purchase process
Make an offer:If you are buying at an auction, you are required to pay a deposit (usually 10% of the purchase price) immediately. If you are buying privately, you are usually required to pay a holding deposit (usually 0.25% of the purchase price). The Contract of Sale:This is prepared by the real estate agent, or by the vendor’s solicitor and outlines your offer, the date of settlement, and any conditions that must be met before the sale can go ahead. Discuss the Contract of Sale with your solicitor and make sure you understand it before you sign it.
Unconditional and Conditional approval:
- Unconditional offer: This is an outright offer to buy a property. You should be 100% sure that this is the property you want and that you have access to the funds to purchase the property. Once the vendor has accepted your offer, you are legally obliged to go through.
- Conditional offer: A conditional offer is also a binding contract, provided that all your stated conditions are satisfied. You can only rescind the offer if one or more of the conditions are not met.
If you have conditional approval, we will assist you with any final queries and then submit the signed documentation to the lender for registration.
The Contract of Sale will state the period of time you have to settle any pre-conditions. When all the conditions are met, the offer becomes unconditional, and the sale of the property will go ahead to become yours.How the settlement process works:
- Your solicitor/conveyancer will prepare and arrange for you to sign a Transfer of Land document. Ensure that this is done at least two weeks prior to the settlement date on the Contract of Sale. This document will be handed to the lender at settlement, and the lender will register it at the appropriate state or territory Titles Office on your behalf. Upon registration, the property will be transferred over to your name.
- Your solicitor/conveyancer will contact the lender, the seller’s solicitor/ conveyancer, and other interested parties to arrange the date, time and place for settlement.
- Your solicitor/conveyancer should advise you one week prior to settlement of the exact date and time of settlement, and the amount of funds that you are required to provide prior to settlement (if applicable). This amount is usually required to be paid by bank cheque one day before settlement.
- After settlement has taken place, the seller’s solicitors will contact the real estate agent that sold you the property and advise them to hand over the property’s keys to you. Your solicitor should contact you and confirm settlement has taken place. They will also provide a Statement of Adjustment to show you how the funds have been disbursed to all the parties involved.