Purchasing your first home is a moment to be cherished - its an accomplishment to the image of a happy and secure future.
It is also an investment not to be taken lightly. Buying your first home can be daunting, to say the least. New terms are thrown at you with new choices that must be made in areas that you may not have a lot of expertise in, such as home loans and interest rates. It can seem a little scary to those who have not gone through the process before.
It is also highly recommended to look for a good home insurance policy, once you have purchased your home. It is the most discomforting thought to be underinsured if tragedy strikes! It will not only ensure your home is protected against damages but it also guarantees peace of mind.
That is why we are here to help. We are giving you ten tips on buying your first home.
1. Deposit Money
First-time buyers should start by saving for a deposit for their home.
If the buyer has a deposit set aside, then the banks will take this into account and the buyer’s affordability score will rise. The buyer’s monthly repayment installment will also be lower. Some banks will even allow the buyer to apply for a higher bond.
It is important to have a good credit score when trying to purchase a home. Buyers should confirm their credit rating before applying for their loan to see if they need to do some credit repair before they start the process.
It makes the difference between being approved for a home loan because of good credit or being denied due to a poor credit score. A good credit profile will show that you have had good credit for a certain length of time.
You gain a good credit score by making monthly payments on time. Buyer’s without a credit history will find it difficult to qualify as well. Banks like to see a credit history and a good credit score.
If you do not have a history established, then it is advisable to open an account somewhere or to get a credit card and begin making timely payments to show a satisfying credit history.
3. What Home Can You Afford?
It is important to find a home that you not only like and can see yourself living in, but also one that you can afford on your monthly income. To figure out how much you will be able to afford on a home loan, take your salary after taxes minus your monthly expenses total, estimate your interest rate and loan term.
This will then be used to determine the total loan amount that you will be able to afford along with the monthly repayment amount. It is a general rule to spend no more than a third of your monthly income after taxes and monthly deductions are removed, to pay your bond payments. Your bank will help you calculate this amount.
When applying for a loan at the bank make sure to take these documents along:
- your current pay slip
- 3 months bank statements
- Proof of Identification
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5. Your Loan
Once your application is approved, the bank will issue you a quote with the required information on your pre-qualified loan. Stated here will be the bond amount, instalment amount and interest rate. Interest is the fee that the bank will add onto your loan.
How much will you have to pay and for how long? These, however, can change depending on the offer to purchase and the bank’s property evaluation.
6. Your New Home
After you have followed through the process above, it is time to start your search for your perfect home. Do you have a preference for a number of bedrooms and bathrooms? What do you want in a backyard? Do you want your home located anywhere specific such as close to schools or shopping centres?
These things need to be considered as you need to have a very clear idea of what you are looking for in your perfect home. Search online and check with different realtors to find what you are looking for in the market.
7. Hidden Fees of Ownership
Make sure to check for all the hidden fees that come with the owning of your new home. Confirm the municipal rates, home owner’s insurance, utility fees, and any levies that will require additional charges and fees.
8. Make an Offer
Once you find the home you are interested in, make sure to find out the property’s value and whether it has good investment potential. Know the standard price that homes in the area are going for, then try to negotiate a better price. Make a purchase offer that seems reasonable for both parties.
Your realtor will help you to set fair conditions of sale for both yourself and the seller. Such details need to be clearly stated in the Offer for Purchase such as Conditions of sale, fixtures or fittings, occupation date, rent, deposits and purchase price as well as any small clauses that are relevant.
9. Apply for the Bond
Once the Offer for Purchase is accepted, it is time to gather your required documentation that the bank will need to apply for the bond. The bond works as a loan and your house will be the collateral for that loan.
Apply for your bond once you, the buyer, and the seller have both agreed and have signed an Offer of Purchase.
Once you have satisfied the bank's requirements and have the paperwork filed, it is time to wait for an approval.
The bank will look at your FICA and credit ratings, and process a property valuation. The property valuation is done to prove that the property is indeed worth the amount of the loan. A valuator will inspect the property and then submit a report.
The bank will then be advised if the property is worth the loan amount. The whole approval process can take up to 7 working days. If your bank approves your application, your loan will be approved.
It is now time for you to sign and accept the conditions. You will then need to finalise the agreement with your attorney.
Now that you know which steps to follow, it should be a breeze to purchase the home of your dreams!