If you’re a first time home buyer, you might be a bit clueless about what to expect when purchasing your property. If so, that’s totally understandable!
Buying a house is a huge decision. It can also be a complicated process that involves lots of financial terminology, processes and approvals, so it’s important to get your head around it all before you start looking.
To help you out, we’ve worked with WA Housing Centre to address 3 of the common question’s in a first time home buyer’s mind.
Make sure you check them out if you’re thinking of buying your first home. It could be the difference between making a bad decision and getting the home of your dreams!
How can I increase my chances of getting a loan approval?
First, you need to understand what a loan officer will base your eligibility on before offering you one. If you are a young working adult, you will be subject to an employment policy when you apply for a loan.
Employment policies differ from bank to bank. Some require you to have been employed for a minimum of three months and others, 12 months. The status of your employment will also be a factor. Some banks generally do not approve loan applicants that are on a probationary period in their jobs, but some might, just as long as your position is permanent.
Some other factors that your loan officer will asses are:
- Your Credit History
The rating system is called ‘credit score’ and is calculated based on the information available in your credit file. The higher your credit score, the more lenders who will be willing to approve your loan. A poor credit history, late bill payments and a high amount of credit enquiries can affect your overall credit score.
- Living Expenses & Liabilities
This information will be based on your bank statements. Lenders will take into account your expenses, your liabilities, and assess whether or not you will have sufficient funds for your loan repayment.
- Genuine Savings
This is a common requirement for most lenders. Genuine savings (the money that you have in your bank account) should ideally amount to 5% of the property price and must be validated in your bank statement for a minimum of 3 months. If the 5% amount was gifted to you, you must keep it in your savings account for at least 3 months before it can qualify as genuine savings.
What are the additional costs – on top of the house deposit – that I should be aware of?
The cost of buying a home goes beyond the price of the house itself. There are many people and processes involved which will require a fee or commission.
Here are some of the common costs involved when purchasing a home:
- Strata Searches
- Home & Contents Insurance
- Rates & Council Fees
- Building & Pest Inspection
- Real Estate Agent Commission
- Legal Fees
- Stamp Duty
- Loan Application Fee
- Mortgage Registration Fee
- Lenders Mortgage Insurance
- Transfer Fee
- Moving Expenses
These additional costs involved will depend on your situation and the processes you followed through for your home purchase.
To estimate the extra cost involved so that you can prepare sufficient funds, use a property buying cost calculator you can easily find online.
It’s important to be prepared and understand all of the costs involved in being a homeowner so that the joy of buying your first home isn’t ruined by and nasty surprises.
Why should I engage with a middle person like a mortgage broker or real estate agent?
Hiring a good real estate might cost you a little extra, but it will be worth it in the long run. As a first time home buyer, you may know what to look for when you are viewing a property.
You should also find your own agent. The seller’s agent may offer to represent both parties, but it will be hard for them to remain impartial.
A reliable real estate agent will be able to let you know the right questions to ask and give you insights beyond the best price today.
Before engaging a real estate agent, conduct interviews with a few people. This process will help you ensure that they have sufficient experience and truly understand your needs. If you choose
A mortgage broker will also be helpful in finding you the right loan. The loan with the lowest interest rate may not be the best option for you based on your individual circumstances and needs. A mortgage broker will be able to source the best options and do all the hard work for you, usually at no additional costs.
Finding out that a loan doesn’t cater to your needs when it’s too late can be very expensive, and a reliable mortgage broker will be able to prevent this situation.
At the end of the day, the most important thing is to be as informed as possible. Making good decisions early on can save you a lot of time, effort and money of the course of your home loan, so do your homework before you consider buying your first house.