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Buying a home is a wonderfully exciting and nerve-wracking time in your life. There is a lot of uncertainty involved in house hunting: what if you can’t find a place that meets your needs in your budget? How do you apply for a loan? What if someone claims your dream house before you? Whether you are a first-time buyer or a seasoned purveyor of property, you can use these four home loan tips to get you moved into your little slice of heaven ASAP.
1. Check Your Credit
If you don’t have good credit, you’ll have a difficult time securing financing for a home, so the first step in buying property is to be aware of your credit score. Your credit score informs lenders of your history of managing and repaying debts, loans, and other credit obligations.
A high credit score tells lenders that you are responsible with payments and a low-risk loan applicant. In Australia the good credit range is 625-699, however, the name “good” is a bit of a misnomer. Think of this as average credit, middle of the road.
Excellent is the highest possible credit score rating and ranges from 800-1,000. You can check your credit for free with one of Australia’s credit reporting bureaus, but keep in mind that several inquiries in a short amount of time may bring down your score.
2. Determine Your Budget
The golden rule in securing a home loan is to know your budget. Springing for that beautifully upgraded home at the top of your budget isn’t always the best financial decision. Just because someone is willing to loan you $350,000 doesn’t necessarily mean you need to take the full amount.
Additionally, when looking at the price of a home remember that sticker price will not be the final price. Factoring in additional payments such as property taxes and homeowner’s insurance is essential to staying on budget.
In general, you should shoot for your total monthly housing expense to be equal to no more than one-fourth of your gross household income. You can easily get an idea of how much to budget for your new home by using this monthly payment calculator.
3. Seek Pre-Approval
Getting pre-approved for a home loan is a great way to take a lot of the stress out of purchasing a home.
Getting pre-approved is a boon to your home search for two reasons: it confirms your budget and gives you an edge when making an offer against those who are not pre-approved. This is because to get pre-approved a lender would have already assessed your debt-to-income ratio and overall financial wellbeing.
After being pre-approved you should receive a letter of confirmation, submitting this along with your offer lets the seller know that you are a serious buyer. While getting pre-approved for a loan is not necessary to your house search, it can make the difference between moving in and moving on in a hot market where things move quickly.
4. Start Your Search
Walking through the space and visualizing the years to come and memories to be made in it is what makes buying a home such an emotional and invigorating time. However, it is important to remember to do your research and not make such a big decision on emotions alone.
In addition to budget, you should look into what you want out of your home and your neighbourhood and make a checklist to compare what ticks the most boxes. Getting a real estate agent to help with this part is highly recommended.
Real estate agents can offer unique, expert insights into the area and home you are interested in. Agents have to be on top of market trends, pricing, new developments coming in and all the secret hot spots in a neighbourhood.
Due to their insider knowledge, years of experience and the fact that they are not as emotionally invested in your future home as you are, your agent will be more adept at negotiating you the best possible deal.
They will also likely attend the inspection, property investing advice indicates you should attend this portion as well to get a better understanding of the condition and workings of your home and to discuss any findings or changes to your offer with your realtor.
House hunting is an exciting journey, and although it can be long, arduous and full of surprise twists if you follow this guide and keep your footing the path will always lead you home.