Buying your first home is a learning curve. When you start looking to buy, youll encounter terms and concepts youve never heard of and youll experience the world of real estate and the property market first-hand. Theres a lot to take in and it can be a little daunting, but once you get your head around it, youll soon discover that its pretty straightforward.
Of course, theres a number of dos and donts that will make your journey much easier and safer so you avoid making mistakes and falling into some nasty and costly traps. Lets look at these now.
First Home Buying Dos
Do research the market Before you think about buying a home, go and look at whats available. Find out about house and land packages, first home buyer grants, and look at established homes. Work out what type of home youre looking for, what features it needs to have, and narrow down the areas that youd like to live in. Then determine whats affordable and whats not.
Do talk to your lender Visit a lender or mortgage broker. Talk to them about what youre looking to achieve. Give them an indication of when youd like to buy, then discuss your options. Ask about your borrowing power, and how much of a deposit youll need, if you havent already saved one. Also find out about lending terms and conditions and if youre eligible for a home loan. If youre not, then find out what you need to do so you can be eligible.
Do reduce your existing debt If you have a credit card or car loan, then pay these off. The less debt you have, the more you can borrow to buy a home. Its also a good idea to reduce your credit card limit as this can decrease your borrowing power by $4,000 per $1,000 of credit. For instance, if you have a credit card with a $6,000 limit this could reduce your borrowing power by as much as $24,000.
Do save a sizeable deposit The more you save as a deposit for your home, the less youll have to borrow. This means that youll reduce your costs, especially if you have to borrow less than 80 percent of the value of your home. This is because most lenders will charge you Lenders Mortgage Insurance (LMI) if you have to borrow more than 80 percent. LMI can add thousands to the cost of your home loan.
Do factor in extra costs Youll need to work out how much stamp duty, conveyancing (property solicitor) fees and mortgage title registration will cost you before you buy. These costs can add thousands to the amount youll need to have so you can buy a home. Failing to account for these costs can mean that youll come up short of funding when you buy. So its better to work these out before you embark on your journey.
Do have a savings history that spans over 6 months Most lenders will require you to have a history of saving that spans over a minimum of 6 months or more. This gives the lender reassurance that you can afford a home loan and that youre responsible with your money.
First Home Buying Donts
Dont over stretch your budget If youve calculated how much you can afford to repay on a mortgage, then dont look at homes that are more expensive than this. Otherwise you may find that youll over commit yourself financially.
Dont sign a contract of sale unless you understand the document If youre not sure about buying a home or you dont understand the contract, then dont sign anything. Ask a solicitor to look over the document for you and to explain what everything means. A contract to buy a home is legally binding and it obligates you to make the purchase of the property within the time stated on the document. So if you havent got the finance approved and you then find out, after signing the contract, that you cannot get finance through a conventional lender, then you may be forced to find finance elsewhere at a much higher rate than market value. Therefore, it is vital that you ask for a subject to finance clause to be put in your contract of sale before you sign it. You can also ask for a subject to a building and pest inspection if youre buying an established home.
Dont forget to have a property inspection carried out Always have a pest and building inspection carried out on a property before you buy it. These inspections will typically cost you under $400 each, and can save you thousands in unwanted expense if the property youre interested in turns out to be structurally unsound or white ant damaged.
Dont rush into buying If youre not sure of buying a home then take your time and think about it. You may also find that youve been looking at homes for months and that youre becoming frustrated. If this is the case, then stop house hunting for a couple of weeks. Give yourself a breather and then start house hunting again. Otherwise you may find that you buy a home that you really are not really happy with.
Dont be too fussy Look at the long-term picture and the possibilities of a home when buying. Expecting a property to have everything on your wish list is unrealistic, you will need to make some compromises when you buy.
Dont change your employment If youre looking to buy a home, then a lender wants to see a long-standing and secure employment history. If youre continuously changing employers or employment, then its highly unlikely that youll secure a loan.
Are you seeking to buy your first home? Then contact eChoice and discuss your options. 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!