Starting your home buying journey is as exhilarating as much as it is nerve-wrecking. There are several things that you have to go through in order to make the right choice. Juggling between finding the optimal location, money saving and insurance you can lose track of what is really important. Making any big financial decision in life involves more or less the same steps.
However, there are several additional things that you should keep track of when choosing your future home. Getting educated on the topic and preparing in advance will allow you to head into the real-estate market with more confidence and negotiating power. Here are five key things you should know before buying a home.
Determine your budget
Before making any big decision regarding your new home, it is important to figure out where you stand. You have to decide how much house you can afford. This will determine all the other steps that you take. For instance, you will be able to decide if it is more affordable to buy a whole new property or perhaps build a home.
In either case, you will need to use a mortgage affordability calculator which uses a dedicated formula that will allow you to figure out what your budget should be. For instance, this calculator will give you a good estimate which will let you determine how much money you should save for the down payment as well as the closing costs. Typical loans require a 5% down payment and 3% for estimated closing costs.
Make sure to determine which mortgage calculator you will need because they can be based on the total home price, down payment amount, interest rate, loan terms or any other expenses such as taxes and insurance. In some cases, your income and current debt payments will play a role when determining the affordability of a property.
Choose the right course of action
Once you determine your budget you can consider what kind of options are out there. In some instances, the safest option is to buy a new home, since renting costs are constantly rising. This is especially important when you consider the fact that you might want to move to or stay in one place for good. A really important thing to understand about making any home-buying decisions is that they will have a huge impact on your future. That is why you need to consider the costs and responsibilities that come with owning a home.
When your heating stops working all of a sudden, or something unexpected happens to your pipeline, you have no one to rely on other than yourself and your local handyman. These kinds of repairs are usually very expensive and can disrupt the balance of your finances. That is why you have to carefully inspect the property that you are looking to purchase.
Prepare your finances
In countries like Australia the mortgage market is huge and it has been recorded that the total value of new housing loan commitments is around $33 billion, according to the Australian Bureau of Statistics. This means that the market is highly competitive and many people choose to purchase a home using a mortgage.
However, in order to do that you will need to meet the requirements for mortgage approval. The best way to go about this is to consult professional Sydney mortgage brokers, which is going to allow you to move around the market quickly and worry-free. When you opt for a mortgage, you will need to keep an eye out for several things. Down payment is a mandatory step when making any home purchase, with the professional help you will be able to get a down payment as low as 3%.
Closing costs are another important component to consider which include covering various taxes and fees before buying a home. There are also move-in expenses and reserves to make note of, as they are quite commonly required.
Consider the types of mortgages
When getting a mortgage, you should familiarize yourself with the different types that exist on the market. Bridging loans are a good option when you are planning to sell your current property as they give you a 6-month period to sell your property while navigating the market.
There are also fixed and variable loans that you can use depending on your preferences. A fixed rate will allow you to keep the interest rate locked at the time of the settlement. This offers you more security in the long term, although you might lose the benefit of falling interest rates if they occur as the market changes. Non-conforming loans allow you to secure a loan in case your credit rating is not stable and cannot be approved. This is done by providing other means of validating your ability to repay the loan.
Prepare all of your documents
Lastly, make sure to prepare your documents before heading into any negotiation. This includes bank and investment account statements, tax returns, proof of supplemental income, and payslips.
Buying a new home is a really important milestone in many peoples’ lives. You can make sure that things go as smoothly as possible if you consider: creating a budget, realizing the breadth of responsibilities as a new homeowner, preparing your finances, learning more about mortgage types, and preparing the necessary documentation ahead of time.
By Derek Lotts