7 things first home buyers need to know
There are certain things first home buyers need to know. While buying your first home can be overwhelming, there are a few helpful ways you can ensure your experience is as smooth as possible. Here are tips first home buyers need to know.
Be deposit ready
Some non-banks may offer home loans if your deposit is under 10%, saving a bigger amount can benefit you in more ways than one, including:
Access to a wider variety of lenders and products to choose from.
Puts you in a better position to negotiate a lower interest rate.
Borrowing less money means lower repayments and paying less interest.
Shows the lender you are disciplined in managing your personal finances.
Keep in mind that deposits of less than 20% may require lenders mortgage insurance (LMI), a larger deposit means that you can avoid this extra cost.
Get educated about your credit rating
Your credit rating will be used by traditional lenders to assess your eligibility for a home loan. However, some non-bank lenders will review your financial circumstances as a whole, so your credit rating is not the defining factor when you apply for a home loan.
Understanding what makes up and affects your credit rating is an important consideration for any home buyer since credit scores are so closely linked to the approval of your home loan. You can obtain a copy of your personal credit file to review your credit rating including any defaults listed against your credit file. There can be mistakes on your report, which you can have amended by requesting a correction from the credit provider or the credit reporting body.
Work out your purchasing budget
Determine how much you can reasonably borrow, taking into account the various fees that may be applicable when taking on a home loan, such as stamp duty, legal fees or lenders mortgage insurance. Also consider your lifestyle, current income and expenses, any dependents, and any lifestyle changes you envisage – like a job change or starting a family so you can make sure that your repayment amount is still affordable in the future. Use our loan repayment calculator as a guide to what your repayments could be.
Home loan suited to your needs
When it comes to finding the right home loan product it’s important to consider all aspects of the home loan, rather than just the interest rate. Research the loan options available and consider redraw and offset facilities, refinance costs, repayment flexibility, fixed or variable interest rates, loan terms, and fees. Your trusted Mortgage Broker can assess your individual circumstances and explain the loan options that could work for you.
Research the property market
The more you know about the property market in the area you are interested in, the better. Being a savvy home buyer can help you spot a diamond in the rough, or a dodgy deal.
Consider not only the location in your research, but median prices over the last decade, rental returns and local amenities like schools, shops and transport links. This information can help you determine if the area where you want to buy is a capital growth opportunity in the long term.
Invest in property potential
Sometimes the best locations for property growth are not in the popular suburbs, but neighbouring suburbs, as these provide a cheaper entry point and potential for development.
If you buy a brand new or newly renovated property, you will generally pay a premium for the aesthetic appeal. Buying an existing home that has previously been lived in may not look as pretty, but may provide better value and let you put your own stamp on its appeal.
Home loan pre-approval
There is no cooling-off period at auctions, and buyers can find themselves in serious strife if they sign a contract of sale without finance approval as a deposit is required immediately.
Having a home loan pre-approval ready not only ensures that you are buying a house that is within your budget, but it also gives you the reassurance that you can negotiate on your purchase price with confidence.
If you're a first home buyer ready to enter the market, keep these seven tips in mind during your property search. They could help you find the dream home you've been looking for and make you a savvy first home buyer.
Ready to take the next steps? Try our borrowing power calculator and get an estimate of how much you could borrow.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.