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10 Things To Consider Before Buying a House
Are you ready to become a home owner?
Before you start booking out your weekends with open for inspections, it can be useful to familiarise yourself with the home-buying process. That way, you know what to expect every step of the way.
To help you get your ducks in a row, here’s a checklist of 10 things you need to know to prepare for buying a house and getting a home loan:
1. How to get approval on a home loan
Lenders may be more likely to approve your home loan application if you can show you have:
• A stable income.
• A savings history.
• A good credit rating.
If any of these things need work, it’s worth spending a few months getting your finances in order before you apply for a home loan, as a rejection can end up on your credit file and may affect future loan applications.
2. How much deposit you need
A good rule of thumb is to aim for at least 25% of the purchase price. While you can secure a home loan with less of a deposit, which is often referred to as acquiring a Low or No Deposit Home Loan, the additional cost of Lenders Mortgage Insurance (LMI) could significantly reduce your home-buying budget.
LMI typically applies when you need to borrow over 80% of the purchase price. Saving up for a 25% deposit may help you avoid this cost, while leaving enough in the kitty to cover stamp duty and other fees and charges.
3. How to find the right home loan for you
A home loan is a long-term financial commitment, so make sure you take the time to research and compare different home loan lenders, rates and home loan features.
You may want to engage a qualified mortgage broker to help you tailor a home loan to suit your needs.
4. What you need for a home loan application
If you’re comfortable with the estimated repayment amount and period, it’s time to apply for the loan. Remember to prepare your paperwork – the lender will want evidence of your identity, income, assets and liabilities.
5. What is pre-approval?
In a competitive buyers’ market, it’s a good idea to seek pre-approval, which is where the lender gives the go-ahead for the loan before you’ve made an offer on a property. This means you’re prepared to buy when the right house comes along.
6. What to look for at an open for inspection
Buying a home can be like running a marathon – you need a lot of stamina. Be honest about how you feel about the houses you visit, and don’t let fatigue convince you to settle.
Take careful note of what might need special care and what could potentially incur future costs. And make sure you research the market, including past sales of similar properties in the area.
7. How to avoid buyer’s remorse
If you’re interested in buying, it’s a good idea to engage professionals to assess the property. The things they look at may include:
- Structural soundness.
A thorough inspection could potentially save you money when it comes to repairs later down the track.
8. How to make an offer on a property
Whether the house is being sold by private sale (through the owner or a real estate agent) or by auction, ensure you have the right documentation and know your legal rights.
- By private sale. An expression of interest may require you to pay a (refundable) deposit. The seller does not need to accept your offer. There may be a period of negotiation before the exchange of contracts, which is when the process becomes legally binding.
- At an auction. An offer is your bid, which is legally binding. You may be required to hand over the deposit on the day of the auction.
9. What does a conveyancer do?
It’s a good idea to hire a professional, such as a solicitor or conveyancer, to help you with the legal aspects of property purchase. This may include:
- Checking the property title.
- Carefully reading the contract of sale.
- Finding out what fees and taxes (e.g. stamp duty) you’ll need to pay and when.
10. What is a contract of sale?
The contract of sale sets out the terms and conditions of the sale, as agreed to by you and the vendor.
While the contract of sale becomes a legally binding document the moment you sign it, there may be a cooling-off period during which you can cancel the sale if you bought the property by private sale. The length of this period varies by state and territory and there are different penalties for cancellation, so make sure you check this before exchanging contracts. The cooling-off period does not apply to auctions.
The contract of sale will state a settlement date. When the agreed settlement date arrives, the property is yours and you can officially start decorating!
Start comparing home loans online now, or call 13 19 20 to speak to one of our qualified brokers.