Owning a home is a significant, long-term commitment that requires strong financial standing and the right timing. If you’re a first homebuyer be realistic about what you can afford. Know that you probably won’t find your dream house at this stage in your life. The keyword when buying a home, especially if you’re a first home buyer, is ‘compromise’!
Here are some golden tips for buying your first home:
Get Your Finances in Order First
Before you even think about what sort of home you’re after, you need to figure out what you can actually afford. The last thing you want is to get your sights set on a property only to discover that it’s way outside your price range.
A good rule of thumb is you should spend no more than 30% of your gross monthly income on housing.
That means taking an inventory of your income, expenses, assets, savings and debts. Debts are taken into account when you apply for a home loan, so pay off as many as you can beforehand. Consolidating debts like credit cards, hire purchases or loans into one personal loan can help you pay them off faster.
Once you know where you stand, sit down with a financial advisor and get some help to determine what you can reasonably afford.
Do All Your Sums
Just because a bank says you can borrow $800,000 doesn’t mean you should. You also need to wrap your head around all the other costs involved with owning a home. The deposit and mortgage payments aren’t the only numbers you need to consider, so avoid emptying your bank account for these costs.
Property taxes, home insurance and maintenance, repairs and utilities can really add up – and they’re on-going. Additionally, it costs money to move, change locks, put down utility deposits and buy things you never needed before, like a lawn mower.
Know What’s Important To You
No house will be perfect. As we said at the start, the key word when buying a home, especially if you’re a first home buyer, is compromise.
So ask yourself what you are willing to compromise on. If you want to be in a specific school area, are you willing to accept a smaller house? If you want to be near the water, could you be happy with an apartment? Are you willing to accept a longer commute to get a larger house?
Get a valuation
Find out as much as you can about the house before you make an offer. Compare it, including its price, with similar properties in the area. Get a valuation. Figure out how much you would need to spend on it to make it truly your own. Decide what your first offer is and what your highest offer will be, and stick to it. You’ll also need to decide what conditions you want to put into your offer.
If you’re buying by ‘offer and negotiation’, you can make any checks and reports as conditions of your offer, and do them while you’re negotiating. If you’re buying at auction or by tender, you’ll need to have most of this sorted beforehand.
Once your offer is agreed and everyone’s signed the Sale and Purchase Agreement, any conditions in the Agreement need to be met. When they are, your offer goes ‘unconditional’, at which point you’re legally bound to buy the home.
Find the Right Team
You don’t have to go through the first home buying process alone. Friends and family who have bought homes can provide invaluable advice about what to do and not to do.
Besides, make sure you find a real estate agent who is right for you. Your relationship with your real estate agent is just like any other financial relationship. It’s important that you mesh well and that they’ll go to bat for you when you find the house you want.
A mortgage broker works with banks and lenders to find you a mortgage. They’re paid a commission by the bank or lender that gives you your loan. Not all lenders offer loans through brokers. If you’re not using a mortgage broker, talk to your bank’s home loan manager.
Get yourself a good lawyer
There’s a range of legal procedures to be completed when you buy a home. Your lawyer will check contracts, make sure the property’s title is in order, transfer the property to your name, register your mortgage on the property title, and help you to make a Will and Power of Attorney.
