Before Finding a Property
Once you decide that you are in the market for your first home, it is easy to get carried away and start attending inspections and auctions. Although market research is always good, it is important to not get ahead of yourself. Your budget will be the biggest dictator of your purchase, more so than even the location or number of bedrooms. Knowing how much you will be able to spend will be the product of different factors: how much you have saved, your borrowing capacity, your income and number of dependants.
After saving as much as possible it is important to speak with your lender or financial institution to determine how much exactly you will be able to spend. Many people often confuse the amount they have saved and the amount a lender will loan them as the amount they can buy a house for; however it is important to factor in stamp duty (if applicable), conveyance or legal fees, and any other fees attached to your purchase. With the final amount in mind, it is time to apply for pre-approval.
Your budget will be the biggest dictator of your purchase
A banking assistant or mortgage broker will help you compile a formal pre-approval of a loan with your chosen financial institute. To apply for pre-approval, it is important to have all of your documentation in order. The specific documentation varies between lenders, however most require the following:
- Evidence of your income: often in the form of payslips, group certificates or welfare certificates
- Identification: 100 points of identification is often needed by providing your driver’s licence, Medicare card, etc.
- Debt statements: credit card statements, balance reports of personal loans, or any other debts you have against your name
- Deposit details: many institutions want to see your genuine commitment to saving a deposit and assist them in determining the percentage of your deposit against the total loan amount
Your pre-approval will take your deposit into consideration and assess whether you will need to pay Lender’s Mortgage Insurance (LMI). LMI is a compulsory insurance to be taken out with a mortgage if your deposit is under 20 per cent of a purchase cost. The amount of LMI you may be eligible to pay will depend on the amount of your deposit and the difference between your deposit and 20 per cent of the total loan. Your lender will be able to talk you through LMI and help you find the best solution for your individual circumstances. Once your pre-approval is granted, it is time to start finding the right property.
Finding a Property
Finding the right property may seem easy, but working out whether it is the best property for you is more daunting. It may be easy to fall in love with the quaint deck or modern kitchen, but does the rest of the property offer you what you need? Senior buyer’s advocate Mark Ribarsky suggests, “Take your time, do your research, and remember what you want may not align with what you need”. Creating a list of non-negotiables and potential areas you would like to live in is a productive first step.
Once you have highlighted these features and found suitable suburbs it is important to decide your buying strategy. Do you feel comfortable researching on your own or are you interested in hiring professional help. Many first home buyers are accessing the services of professional buyers agents to ensure their first purchase attains their goals. Buyer agents are skilled negotiators that assist you with locating advantageous properties and helping you negotiate favourable sale prices and conditions. Buyer agents, also known as buyer’s advocates, provide any amount of help you require from researching areas with growth potential, discern lucrative investment opportunities, to organising pest and building inspections. With your own buyer advocate, you will be well positioned to find the right property and procure it at the lowest possible price.