8 TIPS FOR FIRST HOME BUYERS
Boost your confidence and home loan know-how with the following tip
- Make sure you’re eligible for a home loan. Before you dig in too deep, check that you qualify for a home loan. Contact several lenders to get an idea of how much money you can borrow. This will give you a realistic understanding and expectation of what (and where) you can buy.
- Know the loans and structures. The home loan market is complex and competitive. You need to know what best applies to your situation. Often, people get too tied up in getting the best interest rate or the cheapest deal. The goal should be to get a loan that services the highest borrowing capacity possible – especially in Sydney & Melbourne markets where housing affordability is a concerning factor for most.
- Sort out your debt. If you have accumulated debt, you may find it more difficult to get a home loan approved – or you may not be able to borrow quite as much. Focus on paying off any large debts you may have before you apply for a home loan, especially high-interest debts. Consider combining several debts into one if you can. But note that some debts, such as university HECS debts, are far less troubling than, let’s say, credit card debts.
- Get a good-sized deposit together. The bigger your deposit the more you can borrow. And you can apply for loans with lower interest rates. While it’s possible to take out a loan with a 5% or 10% deposit, you will have to pay lenders mortgage insurance. The general rule of thumb is having a 20% deposit at hand.
- Crunch all your costs (and calculate your concessions). Repayments are one thing, but buying a home incurs many surprise expenses. Budget for removalist costs, stamp duty, application and registration fees and pest inspection reports. It’s an intimidating and scary exercise, but you will be able to manage expectations by doing so. See if you’re eligible for a first homeowner grant or stamp duty concessions. If you’re buying your first home in NSW and it costs less than $650,000, for example, you won’t have to pay any stamp duty. This saves you many thousands of dollars.
- Position yourself for success. If you’ve fallen in love with a particular property, other buyers probably have too. Having all your paperwork and deposit together, plus pre-approval puts you in a much better position to snap up your dream home when you find it.
- Caveat emptor (home buyers, beware!). Imagine buying a car without checking the mileage or brakes and then having it breakdown as soon as you buy it. Now imagine it’s a house and you’ve spent a sizeable million dollars on a total wreck! Ultimately, you as a buyer are responsible for making sure you’re getting a quality property for a quality price. Get building and pest inspections so you’re not stuck with collapsing, termite-infested disasters. Examine the quality of the property’s fittings and construction as best you can. And, if there are obvious repairs that need fixing (and you’re OK with that) make sure you get a quote and factor that into your budget.
- Get expert help. There are professionals who can help you every step of the way in the home buying process. Buyers agents to aid you in the buying processes, and mortgage brokers to navigate the loan market if you can’t. Make sure you have a licensed conveyancer look over your contract thoroughly.