So you’ve decided you’re tired of living in your rental property or with mum and dad. You now want to become one of the millions of Australians who own their own home.
So now what do you do?
1. Understand your current position. How much deposit have you saved?
Work out your income and expenses to determine what you can afford to repay on a home loan each month. (A quick tip: don’t include your current rent in your expenses as this outlay will disappear when you buy a home.)
Before you approach the bank check your credit history to make sure you have no black marks against your name.
2. Try to reduce any existing debt and resist the urge to overspend while you’re saving.
To increase your borrowing capacity, use some of your savings to pay off consumer and personal debts — such as credit cards, store cards and other loans.
And if, like many Australians, you’ve got multiple credit cards, cancel a few. This will increase the amount the banks will lend you — because even if you don’t spend the limit available on your cards, they’ll assume you could.
3. Consult a finance broker to work out what you can afford, what type of finance packages are available to you, what you’ll need to qualify for a home loan, and how much you’ll require for a deposit.
It’s good to get pre-approved for a loan before you start house hunting, so you know exactly how much you have to spend. This means the bank agrees to approve a loan up to a particular amount subject to a few conditions, including valuing the property you plan to purchase.
4. Don’t forget the hidden expenses of buying and owning a home.
Allow at least an additional 5% above the cost of your property to cover purchasing costs, such as building and pest inspections, conveyancing fees and stamp duty, and a little more for buyer’s agency fees if you’re using one.
Having a buyer’s agent to level the playing field can be useful. After all, the vendor has an agent on their side working for them.
5. If you’re having difficulty getting lenders to give you a loan for the type of house you want, you’ll have to budget and continue saving a bigger deposit. Or, you’ll have to be more realistic with your expectations.
Remember: your first home won’t be your last home so be realistic. Don’t expect to start in the type of property it took your parents 30 or 40 years to achieve.
6. Narrow down your criterion for the type of home you are looking for.
Decide on your priorities — now and for the future. What will your home look like? What sort of area would you like to live in? What type of schools and shops will you find in your neighbourhood?
7. Start looking for your dream home.
Do some research on online portals to see what’s available. You want to determine what your money can buy in the suburbs of your choice.
8. Educate yourself so you can understand your financial options.
Your house is not just a home but an investment, so you will have to learn a bit about property market and finance.
9. Attend open for inspections and auctions to get a feel for the real estate market and learn what you can expect to get for your money.
Get used to talking to real estate agents so they don’t intimidate you.
10. When you find a home you love, do your due diligence. This means getting a solicitor to check the contract and a building and pest inspector to look for faults.
11. Once you feel confident you know your local market, start making offers on the homes you want, and eventually, one of your offers will be accepted.
12. Don’t be afraid to negotiate on price. This is particularly true today given the market has turned in favour of the buyer. The odds are the vendor will be flexible because they want to sell their property just as much as you want to buy it.
And don’t be surprised if you feel a little buyer’s remorse a few days after the deal is done — that’s normal after any big financial commitment.
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