If you are considering buying your first home, make sure you cover these 7 things:
1) Bigger deposit, better position
While some lenders can offer loans with a deposit of 5 percent of the purchase price, saving around 20 percent can offer you big benefits:
• Access to a wider pool of lenders and products
• You need to borrow less money overall
• It’s a clear sign to potential lenders that you’re good at managing money.
If you’ve saved less than 20 per cent there are lenders who can help, but deposits of that size require Lenders Mortgage Insurance (LMI). This adds more fees and another layer of assessment of your suitability because LMI providers are separate businesses and often have quite strict rules. For some first home buyers a parent guarantee will solve this problem! (Thanks Mum & Dad).
2) Know your credit rating
Lenders use your credit rating to judge whether your circumstances are suitable for a loan.
Some non-bank lenders will review your financial situation as a whole, so your credit rating’s not always the defining factor when you apply for a loan. But it does matter.
Credit file history is closely linked to the success of home loan applications, so understanding what makes up and affects your credit rating is important for any homebuyer. Get hold of a copy of your personal credit file and review it - including any defaults listed against your name. There can be mistakes on your report - if you pick up on them you can request they get altered. Call us for more detail if required.
3) Work out what your bottom line looks like
You probably know where you want to buy and how much you want to pay; now it’s time to work out how much you can reasonably borrow. You’ll need to take the various home loan fees into account, like stamp duty, legal fees and LMI. You should also think about your current situation, your income and expenses, any dependents (kids or parents), and any lifestyle changes you can see coming up – like a job change or starting a family. Think about what’s likely to happen in the near future - as well as how it is right now.
4) If the home loan doesn’t fit, don’t sign up for it.
There are more things to consider with a home loan than just the interest rate. There are redraw and offset facilities, refinance costs, repayment flexibility, fixed or variable interest rates, loan terms and fees to consider. Make sure you research the loan options available and examine them all.
5) Research, research, research
Did we mention research? Often the difference between a diamond in the rough and a dodgy deal is simply the buyer’s level of market knowledge. The more you know about the property market and where you want to buy, the better. Look at recent comparable property sales to account for current price volatility. Consider location, whether it’s near to shops, schools and transport. You want to be sure the area has what you need in terms of lifestyle, and remember to consider your future.
6) Potential investment
Remember that sometimes the best locations for property growth are not the ‘hot’ suburbs but the suburbs next door. These often provide a cheaper entry point and greater potential for development.
Likewise, a brand new or newly renovated property will generally charge a premium for the look. An existing, lived-in home may not look as pretty, but it can be much better value and then you can add your own personality to it.
7) If you don’t have the finance, don’t make a bid
There’s no cooling-off period at auctions, once you’ve made an accepted bid that’s it. Buyers without finance approval can find themselves in serious strife if they sign a sale contract.
Stay on the safe side, make sure you hold a letter of finance approval from your lender, or offer subject to finance. That way you can negotiate your purchase price without worry.
Buying a home is a long term investment, keep these tips in mind to help get it right!
If you’d like more information talk to us today.
Integrity Finance Australia– Changing Lives
Daryl Borden, your Dingley Village Mortgage Broker, Ph. 03 9511 8883 ACL 392184