Home loans: Tips for first time buyers
Are you eyeing your first move onto the property ladder? If you are, it seems likely that it's an exciting time for you, and maybe your partner or family, too. That's because for many first time buyers, purchasing your own home represents one of the most important investments you can ever make, and crucially, it can offer you security, comfort, and a place to call your own. But in the process of planning your first move in the property market, there are some key considerations which are worth heeding. In this article, we outline some:
In This Guide:
- Obtain your pre-qualification
- Try to ensure your credit score is as good as possible
- Know your Budget
- Do your homework
- Aim for the shortest home loan possible
- Review your offer to purchase
- Conduct a house inspection
Obtain your pre-qualification
Getting pre-qualified can be considered as the first step in the process of getting a home loan. Pre-qualification refers to a financial overview of the buyer - including elements such as assets, income, credit score and debts - which is given to the lender in order to support your application. Once you have achieved your pre-qualification, the path is clear to your home loan. Pre-qualification offers advantages such as the possibility you might have a lower offer accepted by a seller, and a guideline on what you can afford which can help to refine your search.
Try to ensure your credit score is as good as possible
In advance of taking out your first home loan, you should endeavour to shape up your credit score as much as possible. That's because your credit score is an important factor in the size of home loan you are able to get approved for, and whether you will be approved in the first place. If you are concerned about your credit score, you might try to improve it by taking out a credit card or store account and ensuring that you are making regular payments, on time, over a number of months.
Know your Budget
You must be completely realistic as you work out your budgetary constraints, and think about all the related costs which can comprise the investment. You should take into account the initial outlay, as well as elements such as mortgage repayments, and other future expenses which could impact on your finances, like the costs related to children or vehicles. Once you have come up with a realistic forecast of your future outgoings, you will be better placed to decide what you can afford.
Do your homework
Research exactly where you want to buy a home as thoroughly as possible. As the real estate mantra goes: Location, location, location. Because the location of your property is something you will never be able to change, you should be sure that the budget range, transport options and amenities are to your satisfaction. If you are already looking ahead to making a profit when selling the home, you might also like to look at property price trends in a particular area to see if you can detect any patterns.
Aim for the shortest home loan possible
That's because you will have to pay more interest on a long term home loan, which can be worse for your finances in the long run. With shorter-term loans, the monthly payments will typically be higher, but you work towards owning your home outright sooner, and looking at the bigger picture, can save yourself money. Affordable home loans are available, so make sure you carefully compare home loans before making your final decision.
Review your offer to purchase
It is important that you review and comprehend the different sections of your Offer to Purchase document before you sign on the dotted line. You can benefit from the advice of a property professional - such as a home loans consultant or estate agent, who can read the document with you and ensure it is all clear.
Conduct a house inspection
You should ensure that the home you are thinking of buying is structurally sound, and you can do this by having the building inspected by a trained professional prior to buying. They will make sure that elements such as the structure, roof, and even the plumbing, are in good condition. Being careful in this regard can avoid any nasty surprises further down the line.
So those are six tips which you should bear in mind in the process of buying your own home. Remember, by ticking all the boxes in the run-up to your first property investment, you can go a long way to setting up your future.