Q: I’ve been renting other people’s properties for a while now and I think it’s time to try and get in the property market myself. I love researching property and have a fair idea of where and what I want to buy, but I don’t really know much about the finance side. What should I know about buying a first home?
A: There’s nothing quite like the thrill and accomplishment of buying your first property, and with interest rates at historic lows now could be a good time to get into the market.
There are some important things you need to have and know before jumping in that will help you to have the money side sorted, and it’s important to remember that just because you can make regular rental payments doesn’t mean a lender will approve you for a home loan.
Already having an idea of what you want to buy, and hopefully what it will cost you, is a good start, but here are some other important things.
Home loan deposit
Unless you have at least a 5% deposit, most lenders won’t even look at you. I personally think you should have a 10% deposit, or ideally more, because a bigger deposit will put you in a better position. Otherwise, you might be better off renting for a little longer until you can save up more cash.
Regular savings and stability
Lenders will want to see that you have a solid savings history – which could be your savings to build up your deposit. But don’t forget you also need to factor in how you will pay for all the other costs that come with buying property, like stamp duty and legal fees. A quick cash injection from a family member doesn’t count. Lenders will also want to see that you have stable employment. It can be harder to get a home loan if you’re self-employed but of course it’s still possible with the right documentation.
Sound credit history
Lenders will also check your credit history, so if you’ve had some issues in the past repaying loans or bills, this might affect your chances of approval too.
TIP! There are a few websites where you can check your credit score for free so you know what to expect, or your mortgage broker can generally do that for you as part of their free expert service.
First Home Owner Grants
I don’t know whether you’re planning to live in your property or rent it out, or what type of property you’re hoping to buy, but you may be eligible for a government First Home Owner Grant. Grants can give you a cash boost but they differ by state, so make sure you do some research to find out what you could be eligible for.
Certainty about how much you can borrow
Before starting any serious property search you need to know how much you can borrow because that will really dictate a lot about your property search. Getting a home loan pre-approval will also mean you can bid more confidently on a property armed with the knowledge that you have funding pretty much lined up.
An accredited mortgage broker like Aussie can help you with all the above steps, and can even explain the process of buying a property and getting a home loan. I’d also recommend you see a solicitor and let them explain the home buying process to you.
There are plenty of online resources to help you learn more about property including CoreLogic, and Aussie’s free First Home Buyer guide is packed with information if you’re just starting out.
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