5 steps to buying your first home.

So you've decided it's time to get serious and move out of the comfort of mum and dad's home or get off the rental roundabout. It's a big step but here's some simple guidance to help the move go smoothly.

The first step is to save for your deposit and upfront costs. The bigger the deposit you can save the less money you will need to borrow and the less it will cost you in the long run. Most mainstream lenders will lend up to 80% of the property value meaning you need to contribute the other 20% in some way.

This could be via accessing any government grants that you are eligible for, your savings, or using a parental guarantee based on the equity in mum and dad's home. Some lenders will lend to higher amounts using Lender's Mortgage Insurance, however, this is an added cost and often a significant one.

Speaking of costs, in addition to your contribution, you will also need to be able to cover the up-front costs. These costs include things like stamp duty, conveyancing and legal costs, building and pest inspections, finance costs, and so on. Don’t be caught short. Make sure you do your research and factor in all those costs … including moving into the home after you've settled.

Once you're close to having your deposit saved then it's time to visit the bank … or a broker … to obtain a pre-approval for finance. By getting pre-approval you are better placed to know how much you can afford and be more confident to put in an offer when you find the right property.

The lender will look for lots of information from you to help them assess your application. They will want to know things like where you live now, where you work and how long you've been there, how much you get paid, and what other expenses you have.

It's a really good idea to have a good understanding of your own financial fitness before applying for a home loan. Make sure you don’t have any unnecessary loans or credit cards; make sure you know where your money is going and that you're confident you'll be able to keep up the repayments; and make sure that your credit score is healthy.

If you get a knockback the first time, it is not the end of the world. Most lenders will help you to understand why your application wasn't successful and whether there are steps you can take to make your application more successful in future.

Then armed with your finance pre-approval you can now start searching for your home. Owning a home is a long term proposition so it's important to keep in mind what you will need in the future as well as what you need right now.

You'll need to take into account things like the location - is it more important to you to have a short commute to work or to have a relaxed and quiet lifestyle? Is it important to you to have easy access to retail, medical, educational, or recreational facilities? Are there any future development plans that could affect the home … for better or worse?

Another consideration will be what type of facilities the home will need. How many bedrooms, bathrooms, and garages do you need? Is it possible to start out with a smaller more affordable home and build up to your dream home over time? What utilities are connected? Gas? Electricity? High-speed internet? Do you need disability access?

You'll also need to think about what ongoing costs or maintenance the home might need. If it's an older home will it require repainting or recladding? How will you manage the lawn, garden, and possibly pool maintenance? Or if it's an apartment, there will be strata title levies to pay that may go up each year. Make sure you thoroughly research all aspects to give yourself the best chance of ending up with a home that you love and will love you back.

Once you've decided on a home to put an offer on that's when the rubber really starts to hit the road. Put your offer to the agent who will then liaise with their client to negotiate the terms of the contract. You may be able to negotiate things like the price, the deposit amount, and the settlement date. The deposit on the contract may be as little as $1000 but expect it to be more like 10% of the purchase price, and this will need to be paid to the agent when you sign the contract.

It's also recommended that you negotiate the contract to be conditional upon satisfactory building and pest inspections and also finance approval. This gives you an opportunity to withdraw from the contract should the inspectors find something you are not satisfied with or should the lender not approve finance … even if you have pre-approval there is no guarantee that something hasn’t changed or that the lender won't change their mind.

Now the paperwork really gets underway and it’s a good idea to surround yourself with professionals that can help you through the process. Head back to your lender to get final approval of your finance, and then find yourself a conveyancer or lawyer. Your lender and your legal representative will take care of most of the leg work but making yourself available to sign documentation promptly will make their job easier and your transaction go more smoothly.

This is the point where those upfront costs start to kick in in earnest. If you've made your contract subject to building and pest inspections you'll need to have these completed within the set time frame, and of course, pay for them. Once you've signed the contract it is important to insure the home as you now have a financial interest in it.

And your legal rep will also look to have their fees and costs paid too. This will include the most significant expense of stamp duty so again it's important to have the money readily available to cover those as required.

Then on settlement day your legal rep and lender will do the exchange of documents and money. Your lender will need you to make the balance of your contribution available in the days prior to settlement so that nothing interferes with the process on the day. Once the exchange is completed you'll receive the keys to your new home and can take possession.

So, there’s our 5 simple steps to buying your first home. Save your deposit. Get finance pre-approval. Choose your home. Get into the paperwork. Settle and move in. Congratulations!