Buying a home is one of the most exciting (and slightly terrifying) purchases you’ll ever make. The thought of having a home of your own is incredibly exciting, but realising that a home of your own comes with a mortgage of your own and potential expenses you didn’t even realise existed can be incredibly stressful. Having the right preparation can make all the difference.
Is it right for you to buy a house?
Seems like a simple question, but make sure you’ve thought it through. If you’re pining to travel the world, spend 6 months living in the south of France or you’re thinking of a serious career change it might not be the right time to buy a house. A house is a long term purchase so make sure you’re in it for the long haul.
Have you got your finances sorted?
You’re going to need a deposit, and the closer to 20% of the purchase price the better. Yes, a bank will offer you the chance to purchase a house with 5% (or less!) and for some people this can work well, but you will end up paying Lenders Mortgage Insurance (LMI). LMI is the cost the bank makes you pay, to make sure you don’t default on the loan. It can be up to $20,000, and you will need to ask yourself a simple question – “if I can afford a mortgage, why haven’t I been able to save up a decent deposit?”
The bank is going to want to see an extended history of savings, and they’re going to go through your finances to make sure you can afford the mortgage. The last thing they want is to repossess your house, it’s distressing for everyone involved and it’s makes for terrible press and public perception, so expect some stern questioning if your finances don’t look healthy.
Talk to a mortgage broker
As part of getting your finances sorted, you’ll need to find out what you can borrow, what interest rates you can get and how much your repayments will be. The best person to ask is going to be a mortgage broker. A mortgage broker will sit with you, talk through your current situation and help you understand what’s on offer. If you’re happy with what they offer, when the time is right, they will walk you through the whole process of applying for your home loan.
Just make sure that mortgage broker is independent and doesn’t work for a bank (because if he does, guess which home loan he’ll recommend to you). If you’re not sure who to ask, we have a couple of independent mortgage brokers we refer our clients to. They don’t work for the banks, so they’re only interest is in finding the best home loan for you.
Know your limits, stay well within them
Once you’ve worked out what your financial limit is, stay well within it. It’s tempting to max out and buy the best available property, but there are always more costs involved than you expect and the last thing you need is financial stress on top of the decision making process.
Make a checklist
Work out a few suburbs you’d be happy to live in, the types of houses, the negotiable and non-negotiable features. A simple checklist can help you narrow down much faster and keep you focused on what you really want. A clear checklist also helps you when talking to a real estate agent. If you let a few of them know exactly what you’re looking for they can keep an eye out for you and contact you before a property goes to market.
Don’t rush it…
Lastly, take a breath and relax. Houses come and go and sometimes it can take longer than you thought to find a great home. Everyone has a story about the one that got away but hang in there, keep waiting and watching, keep saving and building that deposit.