Gazumping, mortgage insurance from lenders and all the other things I learned the hard way buying my first home

It’s no secret that buying a house is a real challenge in 2022.

For me, registering the deposit was perhaps the least stressful part of the whole process – although it was obviously very time consuming.

My hometown of Scone, in the beautiful Hunter Valley, New South Wales, has not escaped the property boom that has taken hold of the Australian region.

So, as a 24-year-old who had been living independently for five years or more, I returned to my childhood bedroom for about five months as I searched for a home at the historic highest level of market.

‘I was what?’

“This is it,” I said to the support network of mom, boyfriend, sister and grandma when I first saw a house I fell in love with.

They all came back: “Don’t get too excited.”

It had nice big bedrooms, wooden floors, a fireplace, a pantry and a huge backyard that the dog would love. So I jumped at the chance and made an offer that afternoon, knowing that the competition would be fierce.

The next morning, offer accepted!

I was blown away, on cloud nine, beside myself – all the clichés, because I couldn’t string the original words together in the midst of all the excitement.

That afternoon, I received another call: “I’m sorry there was a higher bid.”

I did not understand. “Offer accepted” means the deal is pretty much done, right?

No.

“You’ve been gassed,” the good old grandmother enlightened me.

“I was what? »

She explained that until a contract is signed, an accepted offer means next to nothing, especially in today’s market. In this case, a coastal couple willing to pay counter-offered just $1,000 more.

It hurts. But that hasn’t stopped the house hunt.

I decided there were too many shades of white, but luckily the foreman kept us in line.(ABC Everyday: Amelia Bernasconi)

Find the one – after changing banks

There were a few more inspections afterwards, but very little on the market.

Everything that appeared over the next few weeks had small falls that I just couldn’t look past, including a house that I later learned was in a flood zone.

Until this little mint-colored wonder appears.

“The agent can meet you on Monday after work,” Mom said, giving her near-instant approval after a weekend visit on my behalf.

There was back and forth, and I ended up making my best offer, telling myself that while the prices were high, the interest rates weren’t.

I tried to secure a place in the federal government’s elusive First Home Loan Deposit Scheme (FHLDS), submitting my application on July 1, as soon as the new locations opened.

The big advantage of this is that the government essentially covers your Lenders Mortgage Insurance (LMI) if you don’t make the 20% deposit that most banks charge.

But after the gazumping incident and a few months, waiting for a place with the FHLDS got me nowhere.

So I changed banks, got more borrowing power, took LMI on the chin and got through.

Well, agent, lender and fate did it.

Pest and building inspections came next, and a fast-paced attorney sorted through the transfer of ownership.

Fortunately, I had just furnished the office before I had to broadcast from home.(ABC Everyday: Amelia Bernasconi)

Advice for other first-time home buyers

Realtor Meredith Munro says having all your ducks in a row can help you avoid gazumping and be “the first to cross the line.”

This may include knowing your borrowing capacity, having the deposit ready, and having people like transfer agents, attorneys, and speed dial pest and construction experts.

Financial educator Lacey Filipich says getting into the real estate market isn’t impossible, but it’s getting harder and harder.

Here are some recommendations from Lacey Fillipich and Meredith Munro.

Find discount programs

There are many state and federal rebates and programs that can help you, just see which one you check all the boxes for.

Consider different banking alternatives

With interest rates at an all-time low, Lacey says you may need to shop around to avoid being stuck with a “loyalty tax.”

“If you stick with the bank you know and they think you’re super comfortable, unfortunately they won’t necessarily do what’s best for you,” she says.

And not all lenders can offer all government plans and programs.

Ask yourself if you need a broker

While the broker can get things done faster — because unlike first-time home buyers, they do it every day — Lacey says you don’t necessarily need it.

“To think about it from the bank’s perspective, they’re probably going to get you a good interest rate, whether you’re negotiating for yourself or through a mortgage broker,” she says.

If a broker gets involved, Lacey says the bank often has to pay them not just an upfront commission, but a trailing commission.

“And of course the bank doesn’t want to give them that money,” she says.

Negotiate without intermediary

When trading without a broker, Lacey considers saying things like, “I’m not really happy with this deal, it doesn’t sound as good as the one I’ve seen on the internet.” Or, “What was dropped in my mailbox or what my friend received, so I’m thinking of going through a broker.”

It’s a very quick way to get the best possible deal, and it’s in your interest and the bank’s interest to make you happy.

Have a good team around you

Ms. Munro says to ask the right questions and find out where you stand in terms of money.

“The question you need to ask your broker is, ‘When will I be able to make a down payment and sign a contract?'” she says.

“Because it’s very different from being pre-approved.”

Remember that the process can take time

If the state of affairs leaves you on the sidelines at the moment, don’t give up hope, just keep saving, says Ms. Munro. “That’s going to change again, the market will top out at some point.”

This is general information only. If you need personalized advice, do not hesitate to call on a professional.

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