August 27, 2016
Two key steps make it easy to find a home that fits your budget as well as your lifestyle.
Your new home needs to tick plenty of boxes in terms of being a good fit for your lifestyle. But one of the primary considerations should be whether you can comfortably afford to pay off your new home. That’s where sticking to a purchase budget is a must-do for home buyers.
Staying within your budget is especially important if you’re the highest bidder at an auction. Exceed your budget here and it’s easy to become financially skewered if you cannot secure loan approval to complete the transaction.
Even if you’re buying through private treaty, staying within your buying budget is important. It means you won’t face the possibility of losing a deposit if you cannot secure a loan to cover the rest of the purchase price after you’ve exchanged contracts.
So what’s involved in determining your buying budget?
1. Know your borrowing capacity
A key first step is to know your borrowing capacity. This is how much lenders are prepared to offer as a loan based on your income, household expenses, and even the limit on your credit cards.
You may come across online calculators that provide a figure for your borrowing capacity. These can be useful in providing a very broad-brush figure. But it can be dangerous to rely on these calculators alone as they don’t take into account all your details.
Moreover, different lenders impose different criteria on how much you can borrow. That’s why it makes sense to speak to your local Mortgage Choice broker regarding your borrowing capacity. It’s a far quicker way to understand your borrowing capacity than speaking to dozens of different lenders.
Or take a look at our series of online Guides for more on how home loans work.
2. Arrange loan pre-approval
Your borrowing capacity is extremely useful. But one of the most effective ways to stick to your buying budget is by having loan pre-approval in place.
It’s a really concrete step, and having home loan pre-approval often deters buyers from looking at listed properties outside their buying budget.