6 Steps to purchasing a house & how mortgage brokers can help (Part 1)
Purchasing a home for the first time may seem like a daunting task, the most common terms we hear while thinking about buying a new house are mortgages, home loans, house deposits, etc. Are these terms all there is to buying a house? What other things do we need to consider? There is a lot of information to cover and we know you are busy, so here is a concise 2 part blog and a step-by-step explanation of how you’d go about purchasing your new home focusing on key aspects and need-to-knows of purchasing a new home.
Step One: Setting a Budget
The first step you will take is setting a budget. It may seem like a no-brainer, but it is important to look at your finances and determine what is affordable for you. This would be through looking at your cash flow which is essentially how much you earn compared to how much you spend. A good way to start is by viewing your income, for example:
Assets (Something that benefits you economically)
Other types of income you may get (Rent, commissions, allowances, Selling items)
Initial bank balance
Monetary gifts from parents
Then compare the above to your total expenses, which are complex but can be summarised as follows:
Bills & utilities
Groceries
Insurances
Medical costs
Additional expenses
It would also be good to take into account other factors like where your career is headed and other big financial responsibilities you have; this is because buying a new home is a big financial responsibility and you may already have other financial obligations such as student loans, credit cards, personal loans or car loans. Determining whether you have good credit or bad credit and saving up for a home loan deposit is essential. Your home loan deposit is basically the combination of:
Your first-time payment (Usually 20% of the purchase price of your property)
Extra fees
And stamp duty (5.5% of purchase price)
Transfer costs (generally <= $5k)
You may also run into LMI which is short for lenders’ mortgage insurance which is money paid to your lender or trustee for extra securities you may need when taking a mortgage. While budgeting you should also know there are First Home Owner Grants (FHOG) which entitles you to a one-off grant of $10,000 ($20,000 in Victoria) when you purchase or build your first home.
Step Two: Finding Out How Much You Can Borrow
After checking your finances and finding a property you like, you will be moving on to the third step which is determining how much you can borrow. The amount you may be allowed to borrow can vary across different lenders. It is also affected by your credit score; a credit score is used by lenders to determine how much you can borrow. Although most banks offer calculators on their websites for you to determine your borrowing power, this alone does not show you all the options you have, and this is where consulting a mortgage broker can really help open up new avenues to home loan options you wouldn’t have known about otherwise.
Step Three: Finding a Suitable Home
After getting your finances in order, you can now look into finding the right place to call home! There is a lot to think about when looking for property and a lot will come down to your personal preferences and own research, but here are a few key things you should keep in mind when house hunting.
Make sure you can realistically afford the property! It’s fun and exciting when finding a new home and everybody has their perfect dream home, but make sure you aren't biting off more than you can chew!
Location is a big consideration and you should take into account how far you are from the main essentials like the supermarkets, shops and your workplace. it should be convenient for you to get around to the places you need to go.
You want to make sure it's a safe neighbourhood, as we know not every neighbourhood has a good reputation so remember to do your research and stay away from the shady side of town!
Now you know what you can afford and what you’d like to buy, we can move on to finding an actual home loan and making an offer as well as what it’s like in the final stages of purchasing your property before it’s fully transfered to your name and you are handed the keys to your new home!
Information Disclaimer:
Any advice provided is general and does not take into account individual objectives, financial situation and needs. All individuals should consider whether the advice is suitable for them and their personal circumstances.
