With the cost of renting ever increasing and property prices continuing to rise in most markets, it seems sensible to jump into the property market as soon as possible.
But, without careful planning and research, rushing into home ownership can have disastrous results.
To help you decide whether you’re ready to buy, Citiwide Homeloans has put together a checklist of ‘must-dos’ prior to seeking a loan.
Here are 5 things you need to do before you go to the bank:
1) Save a deposit
The absolute first thing you need to do before buying a home, is save a deposit. As a general rule, the bigger the deposit, the better.
Not only will a substantial deposit lessen the amount you have to borrow, it will often help you secure better interest rate discounts with a home loan provider.
As well as this, a deposit of 20% of the purchase price plus enough left over to cover administration costs (e.g. stamp duty) will allow you to avoid paying Lenders Mortgage Insurance.
The other great thing about saving a deposit is that it allows you to judge the amount of money you are capable of saving per week, which will assist you when it comes to step 2.
2) Work out a budget
To save for a deposit you will need to know exactly what your incoming and outgoings are and the best way to work this out is with a budget. There are many great budget templates available online.
Doing this now will also put you in good practice for when you do take on a loan, as a budget is key to successful home loan management.
Future proof your budget by thinking about your current financial situation, and how it might look in two, five or ten years’ time. Consider what might change in terms of family and employment.
Ensure that your loan repayments will be manageable now and into the future.
3) Check your credit rating
Before applying for a loan it’s a good idea to check out your credit history, as to avoid any nasty surprises down the track.
Your Mortgage broker and other companies can help you access your credit rating, and can also give advice on how to clear it prior to applying for a home loan.
4) Get pre-approval
Once you know that your credit rating is in good shape, it’s a smart idea to seek pre-approval (or conditional approval) before you start looking for your dream home.
Pre-approval will give you an idea of how much money you can afford to spend on a house, meaning that you can limit your house search to properties inside a realistic budget.
It will also give you more negotiating power with an agent if you have pre-approval.
The best way to get accurate pre-approval is to talk to a mortgage broker, who can not only help you figure out how much you can afford to borrow by comparing hundreds of different home loan options, but can talk you through the whole loan process and assist with all the paperwork.
5) Shop, shop shop!
Once you have your deposit, have spoken to your mortgage broker and know how much you want to spend, it’s time to look at houses!
Like anything, it’s a good idea to do your research and to shop around. Interested in a particular area? Speak to a local real estate agent about average house prices and make sure you don’t overpay.
While it’s tempting to buy the first fantastic house you see, being patient will pay off.
Do you have any other tips to add to this list? Please share them in the comments below.