Buying your own home is a goal that many of us have, but we find it difficult to achieve. However this does not need to be the case, providing that you are willing to exert a little effort and do some planning, and are determined and have patience. Let’s look at how you can get into your own home now.
Work Out How Much You Can Afford to Spend
Before you start to save for a home deposit you need to determine what you can afford to buy. To do this use an online BORROWING POWER CALCULATOR. This will ask you to put in your annual income and your expenses, less your rent, as you will no longer be paying this when you buy a home. Instead your rent payment will go towards the payment of your home loan. The calculator will then calculate the maximum amount you can borrow based on the information you supply. In order to reduce your risk and to allow you to be able to pay your home loan if interest rates rise, most financial experts would suggest buying a home that is below the maximum amount you can borrow.
Calculate Your Costs
Your home loan is just one of many costs associated with buying a home, you also need to take stamp duty, mortgage title transfer and conveyancing costs into consideration, along with local council and utility fees. These can add thousands to the cost of a home loan. Plus, you’ll need a minimum of 20 percent of the purchase price of your property as a deposit, unless you want to pay lenders mortgage insurance, which can also add thousands to the cost of your home loan. In this case, the minimum deposit you’ll need is 10 percent of the property value.
Check If You are Eligible for Any Government Grants
If you’re a first home buyer then you may be eligible for a government grant. These grants are subsidies that help first home buyers to enter the market, and are designed to make home buying more affordable. Some state governments may also reduce stamp duty and other costs for first home buyers. These grants and rebates differ from state-to-state.
Searching for the Right Home Loan
The home loan industry is competitive and there are many home products on the market. So before you approach a lender or mortgage broker, familiarise yourself with what is available and what type of home loans and features are on offer. Then consider what you need in terms of financial flexibility and how your home loan will cater to your personal requirements. Some of the most popular home loan features are an offset account and redraw facility as these allow you to reduce your home loan interest and still have your savings at call if you need any extra money.
Once you’ve decided what your home loan needs are, then it’s time to go in search of the best home loan deal. To do this, firstly research home loans online. This will give an idea of what’s available and the pros and cons of each home loan type and how features work. When you feel confident then approach your bank and a mortgage broker to see what they can do for you. Get a printout of the loans they have on offer, which are suitable for you, and ask them to explain anything you don’t understand so that you are well informed before you make a decision.
Applying for Home Loan Pre-approval
Once you’ve found the best deal for you, then it’s time to contact your lender or broker and to arrange a time to put in your application. You’ll need to supply them with proof of income and identification documents. Pre-approval allows you to know how much you can borrow, and is typically valid for 6 to 12 months from the date of approval. If you have not found a home to buy within this time you’ll have to re-apply as your financial circumstances may have changed.
Home loan pre-approval is usually subject to you meeting conditions, such as the property you’re interested in being valued at or above the price you are going to pay. If a lender’s conditions are met, then in most cases formal or final approval will be given.
Finding the Right Property and Making an Offer
Once you have home loan pre-approval then you can start searching for your property. Make a list of your home requirements, 3 bedroom, 2 bathroom etc., think of what you need now and well into the future, as buying a home is a long-term commitment. Look at sales data online and go to open inspections to get a feel for the market. Don’t buy the first home you see.
When you find a home you like, negotiate a better price, and make your offer subject to finance and, a pest and building inspection. This will then allow you to get final home loan approval and to check that the property is sound.
If your offer is accepted, then it’s time to sign legal documents. If you’re not sure of the details then have a solicitor review the contract before you sign it. At this time you’ll also need to arrange a conveyancer to handle the transfer of the property into your name.
The Waiting Game and Settlement
It takes time for your legal team to sort through the paperwork and for your lender to arrange finance. In most cases this will take a minimum of 6 weeks, possibly longer, depending on the complexity of your purchase. This is why the settlement date for a home is usually months after you’ve signed all the necessary documents. But once settlement is finalised you can go and collect the keys to your new home and move-in.
Are you seeking to buy your first home? If you said YES, then contact eChoice. We can help you find the right home loan.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!