Are you looking to purchase your first home?
If the answer is yes, ask yourself: do you feel ready and prepared to buy?
Buying your first property is no simple task. It requires diligent planning and careful execution. While a mortgage broker can help strip out a lot of the confusion and help you to find the right home loan for your needs, there are a few steps you should be taking on your own first.
We outline the key things you need to consider before purchasing and help you determine whether or not you are ready to buy your first home.
Step one: build a deposit
In order to prove to any future lender that you are a ‘safe bet' it is a good idea to build a substantial deposit. This lump sum of cash will not only act as the down payment for your home, but it will help determine exactly how much you can borrow and what your loan-to-value ratio (LVR) will be.
As a general rule of thumb, the bigger your deposit, the better. For example, a deposit of 20% of the purchase price plus enough to cover costs will help you to avoid paying Lenders Mortgage Insurance.
Furthermore, the bigger your deposit, the less you have to borrow, which will help to reduce your mortgage repayments. In addition, those with bigger deposits are often able to secure bigger interest rate discounts with their chosen home loan provider.
Step two: Get into the savings habit early
While your deposit can be a financial gift from a family member, it is still a good idea to be constantly topping up your deposit with your own savings.
At the end of the day, a history of regular savings in your bank account and a solid track record of employment will make it easier for you to get a home loan. So make sure you get in a good savings plan early.
Step three: credit history
Before you apply for a home loan, it is a good idea to check your credit history. Are there any black marks against your name? Perhaps you forgot to pay a telecommunications bill once upon a time? Any black marks against your name can significantly impact your chances of securing a loan.
Thankfully, there are a couple of companies that can provide you with a copy of your financial history and let you know whether or not there are any problems on your credit record that you need to clear up before applying for a home loan.
Step four: pre – approval
With your credit history in check, it is often a good idea to seek pre-approval before you go shopping for a home.
Pre-approval will give you a good idea of what you can afford, which means you won't look at properties that are outside your budget.
A mortgage broker can help you gain pre-approval by comparing hundreds of home loan options from a variety of lenders.
Step five: go shopping
Now that you have built your deposit, sought the expert advice of a mortgage broker and organised pre-approval you can head out and start shopping for your dream home.
Good luck and congratulations!
Recently asked questions
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