Buying your first home is a wonderful adventure – if you buy the right property for the right amount. This is likely going to be one the most expensive financial commitments of your life so you want to make sure you do it properly.
Here are a few tips to help you on your way.
Save more for deposit
A five percent deposit is not really enough. Sure, you might probably be able to qualify for a home loan with that, but it is not ideal. You will not get the really competitive deals and you will be paying more on interest.
How much deposit is enough? A 20 percent deposit is a good estimate, and 15 percent at the very least. If you are not there then perhaps you should save for a while still.
Pre-approval for a home loan is kind of like getting engaged to get married. Getting pre-approved will help you know how much your loan provider is willing to borrow you so you have a more clear idea what to look for. It also gives sellers more confidence in you as a potential buyer when you make an offer because it signals that you are serious.
Know your needs from your wants
The chances are that if this is your first home you won’t be able to get everything you want. However, you may have certain needs that are not negotiable, like a safe neighbourhood. Make a list of your needs and your wants and take it with you to viewings. When seeing a few houses in a day this checklist will help you remember what you liked about each place.
Do the sums
Don’t rely on guesswork when it comes to your finances. There are actually a couple equations and tools you can use to help you work out what you can reasonably afford.
There is the 28/36 rule: your total housing costs should not be more than 28 percent of your gross monthly income, while total debt payments (not just your home loan) should not be more than 36 percent of your gross income.
You can also use a bond affordability calculator to work out the nitty gritty details of what you monthly versus overall payments will look like.
Remember there’s always another one
Don’t let yourself be rushed into this decision, even if the agent tells you this is a once in a lifetime deal. There is always going to be another once in a lifetime deal – the property market is funny like that.
If you are not 100 percent sure that this is the house you want or even that you are ready to buy, remember that there is always going to be another dream home to find.