How Do I Buy a Home in Sydney?

How Do I Buy a Home in Sydney? A Step-by-Step Guide

You’ve decided you want to buy a home in Sydney.

Exciting and scary, right?

And then approximately 14 seconds later you realise there are deposits, borrowing capacity, pre-approvals, stamp duty, conveyancers, building reports, strata reports, auctions and about 700 opinions from people who bought their house in 1998.

So where do you start?

Not at an open home.

If you’re planning to buy in Sydney, your first step is understanding what you can comfortably afford and what your pathway into the market looks like.

Here’s how I’d approach it.

1. Work out where you stand financially

Before spending every Saturday walking through apartments, get a clear picture of your finances.

A lender will generally want to understand things like your:

• income
• existing debts
• credit cards
• HECS/HELP debt
• living expenses
• dependants
• savings
• employment situation.

And there are really two numbers to think about.

The first is how much a lender may be prepared to lend you.

The second is how much you would feel comfortable repaying every month.

Those aren't necessarily the same number.

This is one of the reasons I like doing the finance piece before the property search. If the numbers tell us your comfortable budget is $750,000, there's little joy in spending three months falling in love with $950,000 properties.

2. Work out how much money you need upfront

Your deposit is only one part of the money you'll need.

Depending on your circumstances and the property, you may also need to budget for things like:

• transfer duty (stamp duty)
• conveyancing or solicitor fees
• building and pest inspections
• strata reports if you're buying an apartment
• lender or loan costs where applicable
• moving expenses
• an emergency buffer after settlement.

A 20% deposit is not universally required to buy a home.

Smaller-deposit lending options exist, although the appropriate structure depends on the borrower and lender.

Moneysmart also notes that buying costs need to be considered in addition to the deposit.

This is why I'd rather work backwards from your numbers than give everyone the same savings target.

3. Check whether you're eligible for first home buyer assistance.

If this is your first home, don't assume you have to work all of this out alone...I can help!

In NSW, eligible first home buyers purchasing a new or existing home for $800,000 or less can currently receive a full transfer-duty exemption.

Eligible purchases above $800,000 and below $1 million can receive a concessional rate.

There's also a $10,000 NSW First Home Owner Grant for eligible buyers purchasing or building a new home.

For a newly built home, the purchase price generally cannot exceed $600,000; for eligible land-and-build arrangements, the combined value cannot exceed $750,000. The grant isn't available for an ordinary established home.

There are also federal home-buying assistance programs that may allow eligible buyers to purchase with a smaller deposit.

Eligibility matters, though. Don't choose a property assuming you'll receive a particular concession or scheme and check the rules later.

Work that out before you buy.

4. Get your finance organised

Once we understand your income, expenses, deposit and goals, we can look at potential lenders and loan structures.

For some buyers, getting pre-approval before seriously property hunting can make sense.

Pre-approval gives you an indication of how much a lender may be prepared to lend based on the information assessed at that point. It doesn't guarantee that every property you find will be acceptable to the lender, and final approval will still depend on the lender's requirements.

Moneysmart says pre-approvals commonly last around three to six months and can help buyers establish their price range before searching.

And please remember:

Your maximum borrowing capacity isn't a shopping budget you have to use.

If borrowing $900,000 technically works but the repayments would make your life miserable, we need to talk about that.

The goal isn't simply to get the loan approved.

It's to buy the property and still have a life afterwards.

5. Start looking for your Sydney home

Now comes the fun/frustrating/slightly addictive part.

Realestate.com.au becomes one of your most frequently used apps and suddenly you have very strong opinions about west-facing balconies.

Start with your non-negotiables.

Maybe you need to be within a reasonable commute of the CBD.

Maybe you want a second bedroom because you're planning a family.

Maybe you'd rather have a smaller apartment in the Lower North Shore than a larger property further out.

Maybe location isn't particularly important and space is.

Your finance gives you the boundaries.

Your life decides what you do inside them.

6. Found an apartment? Don't forget the strata side

This deserves its own mention in Sydney because apartments make up such a significant part of the market.

You're not only buying what you can see inside the apartment.

You'll want your conveyancer or solicitor to help you understand the legal side of the purchase, and appropriate strata enquiries can help uncover information about the building and owners corporation.

Things like major upcoming works, levies and building issues can materially change how attractive an apartment is.

A gorgeous kitchen doesn't necessarily compensate for a very expensive problem sitting in the building.

7. Have the contract reviewed before you sign

Once you find a property you want to buy, involve your solicitor or conveyancer.

They can review the contract and explain what you're agreeing to.

Moneysmart specifically recommends having a solicitor or conveyancer review the contract of sale before signing.

At around this stage, you should also tell your broker (ME) you've found a property.

We may need to check the proposed purchase against your finance position, lender requirements and any relevant scheme or valuation requirements.

Please don't let the first message I receive be: “Hi Eshanee! We bought a house last night... settlement is in four weeks.”

Pleaseeee tell me before. My blood pressure appreciates it.

8. Be particularly careful if you're buying at auction

Sydney loves an auction.

Your finance needs to be organised before you bid, because buying at auction is different from making a conditional offer.

If you're the successful bidder, you generally don't get a cooling-off period, and the purchase isn't automatically subject to finance or a satisfactory building and pest inspection.

Moneysmart recommends arranging the appropriate checks before bidding.

That means you don't want to bid $20,000 above your planned maximum in the heat of the moment and then call your broker from the footpath asking:

“Can we make it work?”

Sometimes the answer will be no.

Have your limit before you arrive.

9. Move from pre-approval to formal approval

Once you've secured a property, your lender will need to assess the actual purchase.

That may involve things such as:

• the signed contract
• a valuation
• updated financial information
• confirmation that your circumstances haven't changed
• final assessment against the lender's policy.

Once all relevant requirements have been satisfied, the loan can progress toward formal approval and loan documents.

10. Prepare for settlement

Your conveyancer or solicitor will handle the legal side of transferring the property, while your lender and broker (me) will deal with the finance side.

In NSW, transfer duty is generally payable by the purchaser by the earlier of settlement or three months after signing the contract, unless an exemption, concession or different arrangement applies. Your solicitor or conveyancer will usually arrange its payment as part of settlement.

You'll also need to make sure any funds you're contributing as part of your deposit are available when required.

Then settlement happens...and the home is officially yours.

Cue keys, takeaway on the floor and suddenly discovering how expensive curtains are.

So, where do I start if I want to buy in Sydney?

Start with your finances. Not Domain. Not an auction. Not figuring out whether you prefer a renovated kitchen or harbour glimpses.

Before you know where you can buy, understand what buying looks like for you.

That means working out:

What can I borrow? What would I comfortably repay? How much money do I need? Am I eligible for any assistance? And what price range should I realistically be looking in?

Once those pieces are clear, the property search becomes much easier.

Thinking about buying your first home in Sydney?

You don't need to know everything before speaking to a mortgage broker.

In fact, “I want to buy, but I have no idea where to start” is a perfectly good place to begin.

Eshanee from April Six can help you to understand where you stand, what your options are and what your next steps could look like...before you spend every weekend at open homes.

Click here to chat to Eshanee.

Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.

April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253

© April Six Pty Ltd | ACN: 667183735 | Credit Representative Number 554762

Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.

📱 0488 471 888 | @eshanee_thebroker | aprilsix.com.au