The Biggest Thing is Taking Your Individual Circumstances Into Consideration
Buying your first home is one of the hallmarks of independence and adulthood. It is also one of, if not the most significant financial investment you will make in your life. There is a sense of permanence and accomplishment attached to the purchase that few things can match.
Also, many first-time home buyers have a sense of anxiety because they are entering uncharted territory.
Before you begin the buying process, here are the six most common questions about first time home buying and the expert answers you need to make your path to homeownership a bit less bumpy.
How Do I know I Am Ready to Buy My First Home?
It is true that buying a first home is a dream for many people. However, it is important for you to look at home buying from a logical standpoint.
There are a few important questions you must determine answers for well ahead of signing on the dotted line:
Are Your Finances Stable?
– While stable means different things to different people, generally speaking, you need to have the resources to pay the bills you have now as well as those that will come with homeownership.
Have You Saved Any Money?
– Yes, your down payment may vary, and mum and dad might have a gift of cash to help. However, having saved money for the home buying process shows more than financial readiness. It demonstrates maturity and the ability to set and reach long term goals.
Are You Ready to Settle Down?
Of course, people move, change jobs, and seek advanced education. When you think of homeownership as a financial investment, you should plan on being in one place for several years.
Can You Handle the Maintenance?
– Not every homeowner is handy. Yet, the reality is that if you are not able to do simple home repairs, you must be willing and able to pay a repair person.
2. How Much Do I Need to Save?
While individual circumstances are not always the same, experts agree that saving 10 per cent of gross income is a good figure. For many people, this is where the ideas of savings goals vs savings dreams meet. It is infinitely easier to think about saving than it is to decline a dinner invitation, pack your lunch at home, or pass up an amazing sale at your favourite shop.If it is difficult for you to find corners to trim in your budget, spend a month tracking how much you spend and what purchases you make. Many people are surprised how quickly that daily cup of coffee or snacks after work add up.
You do not have to undertake a Spartan lifestyle but knowing what you can comfortably live without is a huge help when you decide to start saving. This article further outlines how much is recommended for a deposit.
3. I Am Ready for My First Home, What Do I Need to Do?
If you are at a loss as to what you need to do in order to buy your first home, you are not alone. The old saying ‘there’s a first time for everything’ applies here. Fortunately, you do not have to go through this process alone.
Choose Your Area and Do Some Research on Sales in The Vicinity
– Spend a little time looking over the housing market in your target area.
- What is the going price of homes there?
- How are the tax rates?
- Check out recent sales, is there evidence of prices rising or lowering consistently?
Assess The Feasibility of the Area and Plan for Additional Costs Such as:
- Loan establishment fees
- Stamp duties
- Conveyance services
- Property insurance
- Home maintenance
Get Help From a Professional – Dear old dad or your college roommate’s brother might have plenty of sage home buying advice for you. However, unless they are professionals in financial, lending, or mortgage-related industry, you will be further ahead in the long run by bringing an expert onboard.
4. How Do I Get a Loan?
The professional advising you can find lenders who will meet your needs and whose requirements you will meet. This is infinitely better than going it alone and casting too wide of a net. Many lenders have application fees, so a narrow focus based on prior knowledge is best.
5. What Are Lenders Looking For on Application?
You may have herd about the Royal Banking Commission and Lending institutions tightening up their procedures. This means people applying for a bank loan must be as vigilant as they can with their finances and spending. Generally speaking, these are the top decisive factors when lenders are reviewing a loan application.
Your Financial History
– It is a standard practice for lenders to want to see your past skills in money managing. This is because, whether it is considered ‘fair’ or not, lending institutions will use your past behaviour to predict if you are a good credit risk now and in the future.
– Things like your current expenses, credit card debt and other loans in your name help a lender galvanise a snapshot of your financial situation so they can see where a home loan will fit into your financial structure.
How Will You Repay The Loan?
– By looking at your salary, employment history and any accounts you hold, a lender can decide if you are likely to have the resources needed to make your payment.
The Value of the Property Your Looking to Buy
– A lender needs to see how much your property is worth because the property is considered collateral.
The Amount of Your Down Payment
– The exact percentage required will vary somewhat depending on the lender, and their willingness to consider special situations or other unique factors.
6. What Do I Need to Do if I Am Self Employed?
You are correct to believe that lenders will want additional information if you are self-employed. Do not let this kill your dream of homeownership.
The lending industry wants to see your ability to service the loan. It is true that some lenders believe someone who is self-employed may be more likely to default on a loan. Generally, to offset what they see as a risk on their part, lenders may offer loans at somewhat higher interest rates. Additionally, it is common to see modified loan to value ratios.In order to get a loan with the best rates and terms possible, you may need to provide the lender with the following information:
Bank Statements For The Past 12 Months
– Your potential lender is looking for how much money comes into your possession over an average year.
Tax Records – You can demonstrate your income using your tax information.
An Official Statement From Your Accountant – This serves as a means to show your ability to service the loan as well as your company’s business history.
Compiling the necessary information for a loan with lower documentation may take 12 months or longer.
- During this process keep meticulous records be sure to meet all of your debt obligations in a timely manner.
- Reduce as much debt as you can while saving as much as possible.
- Keep an open dialogue with your agent, be sure to mention any important changes to your business or income.
Purchasing your first home is an exciting and occasionally bewildering process. Because there are many details involved in purchasing your first home, enlisting a professional is the best advice for a potential buyer.
Think of it like this; if you needed surgery, you would not try and take out your own appendix. You would find a skilled surgeon. Save yourself tremendous stress and time by turning to a professional to assist with your home purchase.