If you’re dreaming of buying your first home, you’re no doubt reading as much information as you can about loans, the area(s) you want to buy in, budgets, and more.
Becoming a home buyer for the first time is exciting yet scary, and requires you to make a big financial and emotional commitment. Here are some tips for success to help make things go smoothly.
Determine Your Goals
Sit down and work out your goals for the purchase. Why are you buying a property, and what do you want to get out of it in the long run? Perhaps you’re on the hunt for a family home for the next five to ten years, or maybe you’re focused on buying an investment you can flip in the short term. Consider, too, if there are any particular non-negotiables you won’t compromise on.
Everyone has different goals, so get clear on what it is you personally require. Understanding this before you start searching for a property will make it easier to narrow down which homes to inspect, and make it more likely that you find the best house for your needs.
Know How Much You Can Truly Afford
Another big part of buying a home is ensuring you can afford the purchase. Don’t get yourself into the situation where you’ve bitten off more than you can chew, financially, and then have to sell the property for a loss or have the home repossessed.
Check your credit score to ensure lenders don’t see red flags, and then speak with banks or other providers about how much money you might be able to get access to. Remember, though, that what you can afford to spend on a property isn’t necessarily the amount you can get a mortgage for. A lender may be willing to loan you more money than you should spend.
For instance, if you want to keep up the lifestyle you’re used to, you may need to choose a lower monthly mortgage amount. Also, if you know your circumstances could change (e.g., with a job redundancy, retirement, change to self-employment, new baby, or a child off to college), it’s wise to opt for a lower mortgage than the maximum on offer.
To reduce the stress involved in homeownership, it helps to do a test run. Create a separate online banking account and set aside the money you’ll need to spend on loan repayments in this account for six months or more. By doing this, you’ll see if you can truly live on the amount left over or not. If you have to keep dipping in this faux-mortgage bank account, you either can’t afford to buy right now or need to opt for a cheaper home.
Get Paperwork in Order
You’ll also need to have all the paperwork for a loan in place before you put in an application with a lender. For example, you’ll need recent payslips to confirm your income or, if you’re self-employed, many months’ worth of bank statements to show what you bring in. You’ll also have to present details on any current loans (including property, car, student, and personal ones) you have, and other liabilities, like credit card debt.
Banks and other lenders also typically request copies of tax returns, business cashflow and profit and loss statements for entrepreneurs, and proof of your savings or the other collateral you plan to use to secure the loan. Taking the time to collate what you need in advance of approaching lenders makes the process go more smoothly and quickly, and should hopefully give you access to better loan rates, too.
Make a Plan
Once you’re financially ready to buy, start searching for a property. As a first home buyer, you’ll be excited to get going and purchase a home. However, don’t rush the process. Doing this is a recipe for disaster. Instead, take your time and conduct plenty of research.
Spend at least a few months getting to know the suburb(s) you’re interested in buying in. Learn what homes sell for and what they include for their price. Attend open homes and auctions, speak with multiple real estate brokers for advice, and get a real feel for what a fair value is for the type of home you want.
By doing this, you’ll be able to tell which properties are worth looking at seriously because they’re on the market at the right price, and which ones not to waste your time on. Your knowledge will also help you when it comes time to buy the house, either at auction or via negotiations.
No matter your situation, buying your first property will provide you with a steep learning curve and equal parts excitement and apprehension. However, follow the steps listed above, and you’ll give yourself the best possible chance of a wonderful outcome, now and in the future.