For most first home buyers, the payment for their home is the first biggest transaction of their lives. For the majority of first home buyers, this transaction is made with the aid of a mortgage and the process of obtaining one can be rather overwhelming. Understanding the way in which lenders look into your financial history and figuring out just how much you can afford to spend on the loan on a monthly basis is a must. You also need to think about the size of the down payment before even looking at a real estate brochure.
Here are the 4 most important facts to consider before you start the search for your first home.
Your credit rating
When you submit an application for a home loan, your lender will start the process by assessing your credit history. Bad debts and late bill payments will cause you to lose out on points. You can obtain a free credit report before you go any further with the process. This report will provide you with valuable information on your current financial position while allowing for some time to correct any problems.
How much can you realistically afford to pay on your loan? This is a very important question to ask at this stage. Start by tracking your daily expenses and figure out how your income is spent. Make sure to leave some money aside for emergencies, holidays and entertainment when you allocate your finances. You can do this with the aid of a professional or by entering your numbers into an online mortgage calculator. At the moment, interest rates are very low and they may go up in the future. Be sure to allow for some room for increased interest rates in your budget.
20% of the home’s value is the standard deposit amount. However, there are lenders out there, who will accept deposits as low as 5%. Lender’s Mortgage Insurance is a requirement for those who pay below 20%. Of course, bear in mind that the lower your deposit, the higher your loan amount and the more interest you have to pay on your monthly payment.
In addition to your deposit and interest, first home buyers also have to think about stamp duty which will come up to 3% - 5% of the home price. The stamp duty is different for each state. You will also need to set aside some money to pay the legal fees for your conveyance or lawyer. Additionally, you may also have to pay a pest inspector and builder to check the home before you strike a deal.
If you are buying your first home, be sure to contact Capital Wealth Property for unmatched financial and real estate advice. Professional advice from an experienced realtor will help you set your budget, choose the right home and get through the buying process with minimal hassle.