1. Review Your Financial Health
Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances. First look at savings. Don’t even consider buying a home before you have an emergency savings account with three to six months of living expenses. Look at how much is left over in your savings and investment accounts that could contribute towards a 5-10% initial deposit.
Next, review exactly how much you’re spending every month – and where it’s going that includes your rental payment as this is the money that will go towards your own home loan repayment. “Make sure to account every dollar you spend on utilities, kids’ activities, food, car maintenance, insurance and car or personal loan payments if any, clothing, entertainment, retirement savings, regular savings, miscellaneous little items, etc., to know how by saving on rent paid along with how much more you will have to pay towards your new mortgage payment fits into your budget,” says Liz Maloney, owner/broker.
As you research neighbourhoods, factor in how moving would change your transportation costs to work. The commute solution to cost calculator is one that takes into account your vehicle type, along with car loan repayments, petrol, kilometre’s travelled time taken to commute and other factors to help you estimate the cost of a potential commute.
2. Check into Benefits for First-Time Homebuyers
Before you start meeting with lenders, it’s good to know what constitutes a good deal. And that includes looking into offers like off the plan purchase, buy land and build when you can or buy an established property that might make it easier for you to find a property you can afford.
3. Meet with Lenders
Many real estate operators will not spend time with clients who haven’t clarified how much they can afford to spend. And in most instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. That’s why – if you don’t have enough cash (how many first-time buyers do?) – your first step is talking to Sam your mortgage broker from DBIJ Finance who has an in-depth knowledge as he has helped many like yourself over the years of his service in guiding you or putting plans in place to enable you to do so in the near future if you cannot buy one right away.
A lender or broker will assess your credit score and the amount you can qualify for on a loan based your income, expenses to enjoy your life style without compromise versus banks affordability rate. He or she will also discuss your assets (savings) and debt if any held, as well as any government initiative that is available towards your down payment assistance. That’s where your homework on first home buyer program can help, if you have any question call SRO on 13 21 61.
Do some research online but work with a live person like your broker Suresh@DBIJFinance.com.au, who can review your situation, answer questions and, if necessary, suggest how you can improve your credit score and how you can quickly get in to your own property by using one LMI a one off-payment if you are unable to come up with 20% of your own contribution towards the purchase of your first home.
4. Shop Around for a Mortgage.
Don’t be bound by loyalty when seeking a pre-approval or searching for a mortgage. “Shop lenders through DBIJ who have a panel of lenders that they are accredited, even if you only qualify for one type of loan,” says Maloney.
Fees can be surprisingly varied. For example, an FHB loan may have different fees depending on if you’re applying for the loan through a local bank, credit Union major bank or through a mortgage broker as there are great products and deals available through DBIJ Finance who have 30 plus lenders to get you a pre-approval not a prequalification.
5. Have a Back-Up Lender
Qualifying for a loan isn’t a guarantee your loan will eventually be funded, but a pre-approval will guarantee against an Under-writing guideline shift, lender risk-analysis change and investor markets alter. “I have had clients who signed contract of sale documents based upon pre-qualification with an initial holding deposit, and 24 to 48 hours before they were supposed to pay 5-10% full deposit of their contract of sale were notified that the lender froze any further funding or have increased their interest rate making it unaffordable to proceed with the purchase” says Ms Maloney. Having this pre-approval from DBIJ Finance who will seek pre-approval from a lender of your choice that is valid for 90 days gives you the assurance of either proceeding with the approved lender or change to a different lender if the approved lender has increased their interest rates or if there are other better offers available before you are ready to settle in to moving in to the property.
6. Find a Real Estate Agent
Once you know how much you can afford and the loan amount you have been approved, it’s time to find a real estate agent. Look for one who works with a team of people who can offer suggestions about an in-depth information on the property that you are interested or provides you one with a private one on one inspections or use the services of a “ Buyers Agent” one who has your interest at heart not the vendors or speak to DBIJ Finance who along with a panel of lenders also have on their books Conveyancer, Buyers agent, Real estate agent, solicitor, accountants, insurers and other specialised people to make this process easier for you in ensuring.
7. Decide on a Neighbourhood
You’ll probably have an ideal location but keep an open mind as you see how much house you can buy in different areas. Homes and land are less expensive the farther they are from a metropolitan area. On the other hand, imagining that the long commute won’t matter that much is an easy trap to fall into. The stress and costs of a long commute can undermine marriages, finances and mental health.
8. When You Find a Property, Crunch Your Numbers Again
If you’re thinking about making an offer on a home, take another look at your budget. This time factor in closing costs, moving expenses and any immediate repairs and appliances you may need before you can move into the home. Don’t overlook hidden costs such as the home inspection, home insurance, property taxes, Body-corp fees and more.
9. Look Over Utility Bills
First-time homebuyers are often moving from rentals that use less energy (gas, electric) and water than a larger new home will. It is easy to be ambushed by soaring rates when your new house has ceilings higher than your rental – or older windows that leak air.
Before submitting a purchase offer, request the energy bills from the past 12 months to get an idea of the average monthly cost, suggests Rob, “Most utility companies can provide a homeowner copies upon request. “If you are in love with a house and everything else works but the energy bills, have an audit preformed to assess what your options are for making it more energy efficient,” says Rob.
10. Don’t Forget to organise a Home Inspection
After your offer has been accepted, splurge for a home inspection. Spending $500 to $750 can educate you about the house and help you decide if you really want to pay for necessary repairs. You can also leverage your offer depending on the results of the inspection report and make the seller financially responsible for all or some of the repairs.
The Bottom Line
Purchasing your first home is perhaps the biggest financial decision you’ll ever make. Don’t take on more of a financial obligation than you can handle. A small stretch may be worth it, but a big one could haunt you if life gets temporarily bumpy.
That’s why Ms. Maloney suggests keeping your risk tolerance in mind. “If you find great security in owning your house, save more money for a large down payment and find a loan that works for you. The higher the down payment, the less in debt you will be; the less debt, the better you will be able to weather economic storms and still own your house,” she says.