If owing a property is on your checklist for 2012, now's a good time to start planning. As with any major purchase, the more research and preparation you do, the better chance you have of buying something that's right for you.
Know your limits
Before setting off to find your dream property, it's best to get an idea of how much you can afford to borrow and repay – so that you can be realistic in your search and not waste time on properties that could potentially be out of your reach.
There are plenty of online calculators that can help work out your borrowing capacity and repayments. However do keep in mind they provide an estimate only, so be conservative and leave yourself some financial buffers when using these tools. Remember to factor in other expenses as well, such as stamp duties and legal fees which could make a sizable dent in your deposit.
Be thorough when doing the property inspection
Attending open homes can be a hectic and stressful experience. Once you've managed to navigate to the six different properties (that all decided to open within the same 2-hour period on a Saturday morning), you then have about 10 minutes to look around before rushing off to your next destination. Amidst the chaos you might have overlooked some flaws or forgotton to check certain features, which could mean a second visit if you're really keen on the place – provided it doesn't get sold before that.
This is when it helps to have a property inspection checklist in hand, to make sure you look out for important features and flaws (e.g. smoke alarms, crakes / stains, fans / air conditioning etc); as well as to prompt yourself to ask the agent for some critical information about the property which may not be included in the brochure (e.g. rent and lease expiry date (if applicable), rates, security, insulation etc).
Shop around for the best home loan deal
There are many factors to consider when choosing a home loan. For example your borrowing limit may vary significantly between lenders which could be the difference between getting your dream home or settling for something less; also, some loans may have great interest rates but the features offered by another loan with higher rates might end up saving you more in the long run.
While it's important to shop around, it's also critical that you know what to look out for. Consulting a home loan specialist such as a mortgage broker is a stress-free (and cost-free) way to go about this.
Get your home loan pre-approved
A loan pre-approval provides a conditional approval of a loan amount, which can help you shop with confidence when negotiating on a property purchase or bidding at auctions.
Genuine loan pre-approvals follow a similar process to a full loan application whereby borrowers will be assessed on their individual circumstances and needs and are required to verify their identity and ability to repay the loan. Other conditions usually need to be met to move to full finance approval, such as a suitable property valuation.
Keep in mind loan pre-approval is usually a limited time offer, for a period of three to six months.
Here are 5 benefits of a home loan pre-approval:
- It prompts you to begin thoroughly exploring your loan options at the beginning of the property purchase process.
- Saves time (and lessens possible disappointment) by concentrating the property search in a feasible price range.
- Enables real estate/buyers agents to see you as a serious property buyer.
- Helps you gain confidence for bidding at auction or negotiating a purchase.
- Quickens the settlement process as the loan is already part of the way approved.