Preparing to buy your first house is an exciting prospect that might also seem daunting to real estate newbies. It usually helps to be armed with a decent deposit and a good credit score when fronting up to a lender, while having some idea of what you can afford and where you want to buy are also boxes you'll need to tick.
The first thing to do before buying a home is to make sure it is the right time to do so. Owning a quality, well-located, well-priced home usually pays off financially if you plan to live in it for at least five-seven years. But you must be able to afford the property – your current job security and your wage earnings are important factors all lenders will consider.
Next up, you need to try and calculate how much you can afford to repay. The easy way to work out what size home loan you can afford is to calculate your mortgage repayments. You can use a home loan calculator from financial specialist Our Broker to calculate potential loan repayments.
Once you have established how much you can comfortably pay off each month, this will give you a reasonable budget for the amount you can borrow and the home you can afford to buy. Keep in mind, most lenders suggest you shouldn't allocate more than 30% of your monthly household income to repay your home loan.
Saving for a deposit
Saving a deposit is often the biggest hurdle to transitioning from the rental treadmill to homeownership. But unlike the old days, you may not need a 20% deposit, and it can be worth checking in with Our Broker at a time when some home loan interest rates are now below 2.0%.
Moreover, plenty of lenders will let you borrow up to 90% – even 95%, of a property's value. These 'loan to value ratios' (LVRs) show the maximum a bank will lend as a percentage of your home's market value. So, it can be possible to jump off the rental treadmill with a 5% deposit.
Healthy credit score
Keeping your credit report healthy by being credit smart, will make you look better to a lender when you front up for a mortgage. Moreover, having too much credit may make it harder for you to get a first home loan. If you think you might have too much credit card debt, for example, try to close any accounts that you don't use. To check your credit score, go the Federal Government's Money Smart website.
Location, location, location
You'd be familiar with the real estate adage, location, location, location. To find a well-located first home, do your research, listen to the experts such as your local Raine & Horne sales agent and find an area with a bright future.
Typically, this is an area with population growth, and a shortage of land and housing. If there are also good job prospects, schools, health services, leisure facilities, decent cafes and restaurants and excellent public transport, then you're on a winner.
Also, good roads and public transport can push prices sky high – although usually, it is best to buy before the construction of road or rail links start.
To find out more, contact your local Raine & Horne sales agent.