5 tips before buying your first home
Buying your first home is an exciting time and a big decision which needs to be carefully considered. It can be a wonderful moment in your life, if you buy the right property for the right amount of money.
This is going to be one of the biggest financial decisions of your life and one of your largest assets. So, it’s important that you get it right.
Here are some tips to help you buy your first home.
Save as much as possible for your deposit
Some banks ask that you put down a 10% deposit on your home. Others require no deposit at all. But it’s important that you’re able to put down as much as you can afford and not just the bare minimum. This will ensure you’re not paying a massive amount of interest on your home right away. You’re also likely to get a better deal on your interest rate if you are able to put more money down. How much deposit is enough? Aim for at least 20%. If you’re not there yet, you may need to save for a little while longer.
Separate your wants from your needs
This is when you get really serious about what you’re looking for in your first home. Sure, you might dream about natural light streaming through the windows onto wooden flooring. But what you need are specifics – two bedrooms, a kitchen and bathroom, and two parking spaces in a safe neighbourhood. Make a list of your wants and needs. Take it with you to viewings and to meetings with estate agents. This will ensure you’re not caught up in the moment.
Get pre-approved
Getting pre-approved will help you know you much your lender is willing to lend to you. This ensures you know what homes you should be looking at and what’s out of the question. A pre-approved buyer also signals to the seller that you’re serious.
Do the maths
You can’t afford to rely on guesswork when it comes to making this decision. There are several equations and tools you can use to take all the uncertainty out of this process. One you could consider is the 28/36 rule. This states that your total housing costs should not be more than 28% of your gross monthly income and your total debt payments should not be more than 36% of your gross income. You could also use a mortgage loan calculator to work out how much you can afford on housing. Remember, don’t spend the maximum amount. There are other costs of homeownership, like rates, taxes and levies, which you’ll need to consider.
Don’t rush the decision
This is a huge undertaking which could change your life. You need to take your time making this decision. Don’t believe the estate agent who tells you this is a once in a lifetime opportunity. She just wants to make the sale. There will always be another house, another chance, another opportunity. Rather, take your time and be 100% sure you’re making the right choice.