Buying Your First Home and Need Advice?

We’ve worked with many first home buyers, and we know what a disconcerting experience it can be to buy a home for the first time.

When you’ve never been through the process before, there’s new terminology to understand, costs you didn’t know about, finance issues you weren’t prepared for, and conflicting advice from different sources. Here’s how to pave a smoother path towards home ownership.

Tip #1: Know what you can afford

Long before a lender starts crunching the numbers to determine your borrowing power, you need to think about what’s realistic for you. Are you prepared to compromise your lifestyle because buying a dream home is your number one goal? Or, would you prefer to lower your expectations on the type of house you can afford if it means fewer lifestyle sacrifices?

To make these critical decisions, it’s a must to have a budget that tracks your monthly income and expenditure. Include essential living expenses, discretionary spending and ongoing obligations like personal loans and credit cards. Consider possible future scenarios, such as moving to a single income family if you plan to have children, and the likely impact on your budget.

Tip #2: Understand the meaning of pre-approval

Don’t mistakenly perceive pre-approval as a guarantee of getting a loan. Even with pre-approval, you still need to gain formal home approval, which can’t happen until you’ve chosen a property to buy.

Pre-approval means that the lender has assessed your application and approved the loan subject to certain conditions. These conditions vary from lender to lender but usually include a valuation completed by the lender’s valuer or approval of the application by the lender’s mortgage insurance company.

It’s a good idea to seek pre-approval because it allows you to narrow down your property search to homes you can afford, and it may speed up the formal approval process.

Tip #3: Tally up all expenses

When working out how much it will cost to buy a home, your calculations need to extend far beyond saving up for a deposit. Several other significant costs might take you by surprise if you haven’t got the funds ready. These include stamp duty, application fees, valuation and inspections, mortgage registration and transfer, rate lock, title insurance and legal fees. While these are the most common, your mortgage broker will let you know which ones apply to your home loan.

If you need to borrow more than 80% of the purchase price of your new home, factor in the additional cost of Lenders Mortgage Insurance, usually calculated at 1-3% of the loan amount.

Tip #4: Do your research before buying at auction

Buying at auction has its own set of rules so the best way to get the better of your nerves is to find out as much as you can about the auction process in advance. Hold off bidding for a home until you’ve attended a few auctions.

Get familiar with the auction process by going to several as an observer. Take notice of how much the real estate agent has quoted the selling price, compared to how much the property sells for.

Valuable tips to remember when you’re bidding at an auction:

• Be ready to pay on the day if the property becomes yours
• Leave your emotional attachment at the door and stick to your budget
• Never allow the auctioneer to pressure you to bid against yourself.

Tip #5: Put on a poker face

Let facts, not emotions, drive your purchasing decisions. Getting too emotionally involved in a property can lead to mistakes, not least of which is divulging to the real estate agent that you’re desperate to buy the property. At all times remember the agent works for the seller.

House hunting is a chaotic process, so the better equipped you are to stay on top of the flow of information, the more confident you’ll feel.  Know that you can always turn to a mortgage broker to help take the pressure off. Your Yellow Brick Road representative can take the legwork out of shopping for the right loan and help you navigate your way through the home buying process.