Buying your first property is a daunting task.
Where do I even start?
What don’t I know?
Information overload is an inevitability.
First home buyers are generally uncertain about the home loan application process. Especially when it comes to the steps necessary to get approval and any grants that they may qualify for.
Understanding and navigating all the different steps of the sales process and the terminology involved can also be daunting.
To top it all off, there are also investment decisions to make, such as:
- Where to buy
- When to buy, and
- What to buy.
Ready to enter the property market? Here are 7 Tips for first home buyers:
1. Determine Your Eligibility For A Home Loan
First, you must find out whether you even qualify for a home loan.
There are a variety of different qualification criteria that need to be met and these will also determine the loan amount that you will qualify for.
Contact a financial expert for assistance to find out if you are eligible and how much you qualify for so that you know what you can afford to spend on a property.
2. Understand Your Home Finance Options
There are a range of different finance products available from different financial providers.
It is important to research these different products from banks or lenders that will provide you with a loan or mortgage.
Compare interest rates, fees and other costs involved with the different options. Make sure to take factors that can affect the loan into consideration such as your income, the amount of the deposit and so on.
It is best to get advice from a licensed credit advisor such as a mortgage broker to find a financial product that suits you best.
One additional consideration is how much money additional renovations and design changes will cost you. The Modern Day Concepts residential designers explain that these costs are often not factored in, which results in further debt down the line. They explain “accurate budgeting must include any forecasts on what you intend to spend on home remodelling or renovations. Always work out what you can afford to borrow and factor in your decisions to this figure.”
3. Resolve Your Debt
Your current debt may reduce the amount you are able to borrow or may even result in finance being denied.
Pay off as much of your personal debt as possible before applying for a home loan. A small amount of consumer debt may not prevent you from getting approval but could affect the loan amount that you qualify for.
4. Secure Your Deposit
The greater the deposit that you are able to put down, the more likely you will be to get a home loan approval and the less you will be paying in interest to service the loan.
According to the financial team at Robinson Accounting, it’s recommended to have a minimum downpayment of 20%, noting that “anything lower and the amount of money you’ll be paying in interest will not be financially viable. In addition, you may have to go through additional approval processes and be charged additional fees”.
You may need to prove that you have saved for the deposit over a certain period of time.
This is referred to as “genuine savings” in the industry and is necessary to receive Mortgage Insurer approval for deposits below 20%.
However, some Mortgage Insurers will accept proof of rental payment history as evidence of genuine savings in some cases.
So start putting away money every month to go towards the deposit to save on your home loan and as proof of genuine savings.
5. Calculate The Costs
One of the biggest mistakes that first home buyers make is to forget all the additional expenses involved in the process over and above the loan repayments.
In contrast, stamp duty exemption can save you thousands. Or, you may need to pay for building and pest inspection or require Mortgage Insurance.
This shows how many potential avenues there are to either save money, or incur greater costs. So speak to a financial expert to ensure you calculate the costs effectively.
If you’re a first home-buyer, it’s important to get an estimate of the total expenses across all areas of buying or renting a home. According to design experts at Tow and Line “it’s important to tally in the costs of interior and exterior designing. These expenses include furniture, linen, appliances and the added extras used to give it that new home feeling”.
6. Be Prepared
Put yourself in a strong position to negotiate and to purchase the property that you have fallen in love with.
Make sure that all your paperwork is in order, that you have your deposit together and that you have received pre-approval for a loan so that you are able to buy the home of your dreams.
Being prepared is important in all areas of home buying. This allows you to map out the possible future expenses that are bound to show up once you’ve signed those papers.
Building or renting your first home today comes with many responsibilities. Much of which align to the environment and can even save you money in the long run.
Be prepared to plan the possibilities of saving once you’re settled into your new home says expert home lighting specialists at Smart and Fast Electrical. They say “with the growth of first-home buyers across the nation, we are starting to see an influx of new ways to save on necessities such as water and electricity. For example, put aside a budget on LED lighting products that reduce energy use and save you a tonne of money, especially when it comes to purchasing your first home. Save the stress for bigger issues”.
7. Trust The Experts
There are a variety of different experts that you can rely on to guide you through each step in the process.
A mortgage broker will assist you in financing your property purchase.
A real estate agent will assist you in finding the right property and navigating the buying process.
A property lawyer will help with the sales agreement or contract.
Don’t let banks and other financial providers with all their red-tape discourage you from buying your first home.
They actually prefer to lend to owner-occupied borrowers like you who will live on the property rather than property developers or investors.