Buying your first home can be an overwhelming process. Read the following tips to boost your confidence and take the fear out of buying your first home.
1. Save Up A Good Deposit!
When you have decided to look into buying your first home, make sure you have at least saved up a deposit before you do anything else. It can take months and sometimes years to save a good amount of money for a deposit.
If you have less than a 20% deposit saved up, you will have to pay lenders mortgage insurance which is basically “dead money”. If you have saved up $20.000 and you want to buy a $400.000 home then this is only a 10% deposit. On a loan amount of $380.000 you could pay a $12,578.00 insurance payment to the bank (which can be added to your loan).
This insurance covers the bank if you fall short on your payments, not you!
Not only do you have to pay this but you’ll also have to pay interest on the extra funds you borrowed to cover this insurance.
Suggested is that you save up at least a 20% deposit, but go ahead with less if you can’t but know you can afford the repayments!
Tip: The bigger the deposit, the more you can borrow.
Read post: Saving Tips For Your House Deposit
2. Get Rid of Debt
Trying to save up for a deposit is already tough enough, but if you also have credit card debts you might find it hard to get approval for a home loan or they won’t lend you as much. Focus on paying off large debts before applying for a home loan.
Tip: Read The Barefoot Investor.
3. Check All The Costs Associated With Buying A Home
Buying a home incurs many expenses and costs you might not have thought of. Allow in your budget for removalist costs, stamp duty, application and registration fees and pest and building inspection reports.
Tip: Check if you are eligible for a first home owners grant or stamp duty concessions. It can save you thousands of dollars.
The costs don’t end once you have bought your home. Ensure you prepare for yearly council costs and water rates, Strata Fees and Building and Contents Insurance aside from your mortgage repayments.
Knowing beforehand that you can cover all the costs will ensure that you buy your first home with confidence.
4. Check If You Qualify For A Home Loan
Before you start looking at houses you want to make sure you qualify for a home loan. There is nothing worse than finding your dream home and not qualifying for a home loan and seeing your dream home being sold to someone else.
Contact several lenders and a broker to get an idea of the amount of money you can borrow. This will give you a realistic idea on the price range of houses you can look at.
5. Research Home Loan Options
There are many home loan and lender options available and you should compare as many as possible. The types of loans range from variable and fixed rate loans to interest-only and investment loans. Talk to a broker to find out what is most suitable to your situation.
Tip: Don’t be afraid to give show lenders the best interest rate you can find to see if they can beat the rate.
6. Don’t Give Up If You Application Has Been Rejected
It is not the end of the world if you loan application has been rejected the first time. There are a few things you can do and simple steps to take before you try to apply for credit again. Check the website from ASIC for more information.
7. New Home or Established Home?
New Home or Established Home? Garden or No Garden? Close to the city, or not? Close to the beach or close to the hills? Option to renovate or no work to be done?
There are many questions you can ask yourself before you start looking for a home. This will make the search easier and you’ll find your dream home quicker.
8. Inspect The Property Before Buying It
Can you imagine buying your dream home and then finding out that the house is full of termites and about to collapse? Get building and pest inspections done before buying your home so you don’t end up with disasters.
Tip: You can put an offer on a house “subject to building and pest inspections”
9. Get Help From the Experts
You don’t have to do it all alone. There are many experts out there who can help you moving into your first home. You can ask the help of a Mortgage Broker, Buyers Agent or a licensed conveyancer who can look over your contract thoroughly.