First-Time Home Buying Guide: Everything You Need To Know
First-time home buyers have a ton of homework to do before they decide to purchase. Rushing this process can result in a lot of wasted money, as well as a lack of satisfaction.
The best thing to do would be to devote at least a couple of months to planning. This is approximately how long it will take before you find the perfect home. The reason behind this is that there are many aspects of buying a home that first-time buyers may not be aware of.
If you want to make sure that you’ll be able to make good decisions and avoid the mistakes that can come from lack of planning, this article can be a great starting point. Let’s discuss the most important things that you need to know before you buy your first home.
1. Research All Loan Options
In a perfect world, everyone would be able to buy a home with nothing more than a down payment. However, this is a rare occasion and most people are going to have to get a loan from the bank.
This is one of the major things that will probably take up a lot of time and energy. However, it’s of the utmost importance that you learn everything there is to know.
You should take full advantage of the competitiveness in the home loan market. Make sure that your bank can give you the best possible terms. First-time home buyers usually think that it’s all about the interest rate. Unfortunately, that is just the tip of the iceberg.
Finding the right type of loan is extremely important. This includes decisions like fixed or variable rates, investment or interest-only loans, and so on. Also, make sure to take into account things like redraw facilities, additional expenses, and similar factors.
2. Save Up for a Good-Sized Deposit
Not having to give a huge chunk of money at once sounds appealing, doesn’t it? It seems far more convenient to get a loan for the majority of the property’s value. However, this is one of the biggest mistakes that first-time home owners make.
Sure, you can go with a deposit of 5%, but then you’ll have to pay the sizable mortgage insurance that comes with this type of loan, which is very likely to have a high interest rate attached.
The larger your deposit, the less burdensome your loan will be. If you have a deposit of around 20-30%, you’ll be eligible for lower interest rates, and of course, the monthly repayments will also be smaller. For this reason, it’s better to save as much money as you can for the down payment. It might not be easy, but it’s definitely a smart long-term decision. But what if you can’t save this much? Well, there’s another way.
3. First Home Owners Grant
If you haven’t heard of the First Home Owners Grant, you might be missing out on a great deal. Basically, if you’re an Australian buying your first property to live in, the government will help you out by giving you up to $15,000. The actual amount will depend on the state you’re in. It’s tax-free and you can even apply for it up to a year after you bought the home.
The best way to use this money is to apply it to the deposit. However, not all properties qualify for this grant. If you can afford a swank house that costs a ton, you won’t be eligible. The cut-off property value for this grant varies by region. Look up the maximum property value that you can buy and still qualify for this loan and take that into consideration.
4. Research the Location
Even though you might not spend your entire life in your first home, you’ll likely live in it for a long time. For this reason, it’s extremely important that you find the best location for your situation.
The best way to do this is start with a wide area, then narrow it down. First, choose the part of the country where you want to live in. This will have a major impact on your lifestyle, so make sure to research it carefully.
If you already have a city in mind, choose whether you want to live in the suburbs or the city centre. As you probably know, there’s a huge difference in the living atmosphere, so you need to make sure that it fits your lifestyle.
After you’ve made your decision, research the neighbourhood. Find out if there are good schools nearby, how safe it is, are there enough grocery stores etc. This will likely take up most of your time, because neighbourhoods can vary significantly.
Once you’ve determined all of the above, it’s time to think about the most important thing.
5. Research the Dwelling
This deserves a separate section, as there is much ground to cover. Once you know where you want to live, you need to make sure that you find the best property your money can buy. This is likely to be one of the biggest purchases in your life, so you’ll want to make sure to get it right from the first try.
If you’re buying an apartment, the most important thing is to inspect the building. The construction and the terrain it’s built on are among the most important factors. You’ll likely need professional help for this, so make sure to consult an expert.
Another thing that you need to make sure is that the property isn’t infested. Bugs will not only make living uncomfortable but can also cause serious damage to your entire home.
The last thing that you’ll want to check is whether there are some obvious repairs that you’ll have to do. This is not only time consuming but also quite costly, especially after spending a ton of money and energy into finding the place.
6. Think About Affordability…
Your first home doesn’t need to be anything lavish, unless you’re certain that you can afford it. Many people buy an entry-level home, then go up the ladder as time passes. This is exactly what you should do.
Don’t go overboard and buy a home with more features than you need. This would lead to you stretching your budget and getting an unnecessarily large loan, which would lower your quality of life.
Always make sure to buy a home that won’t jeopardize your standard of living. This is especially true for families, as there are more people whose needs you have to meet. Don’t let fancy homes pull you away from maintaining your choice lifestyle.
7…But Don’t Be Cheap
‘Affordable’ and ‘cheap’ are two completely different things. Understanding the difference will help you take a huge step towards finding your perfect first home. You always need to have your budget in mind, but your home is definitely not something you’ll want to be cheap about.
Remember: If it sounds too good to be true, it probably is. Even though the price is one of the main factors, it shouldn’t be the determining one. If you don’t do your research, you might fall for a home that will only let you down.
Keep in mind that the seller only cares about the sale. This means that they’ll often create an image of the home which may not be accurate. Make sure to find out everything about the dwelling and get the best value for your money.
8. Understand the Sale Process
Neville Sanders, president of the Real Estate Institute of Australia, says that buyers need to choose the right sale process. There are two main types of sales: auction and private sales. The media pays more attention to the auctions, mainly because it’s more interesting to report on.
However, private sales are still the prevalent solution. The one that suits you will mostly depend on your goals. Still, private sales might be a better option if you want to avoid making a rash decision, which the pressure of an auction can force you into.
9. Always Seek Legal Advice
Unless you’re a lawyer, you should never go into the process of buying a home on your own. This is especially important for first-time home buyers.
Since you don’t really have a lot of experience, you’re prone to manipulation by the seller. It doesn’t really matter how smart you are, since someone with a lot more experience can easily outsmart you.
As a general rule, all the important information about the dwelling is in the contract. Having this in mind, it should be easy to go through it and close the deal. However, this isn’t always the case. A good lawyer will be able to spot important things that you might miss and come to regret in the future.
For this reason, always make sure to consult an expert before you sign any document.
10. Choose the Right Time
Lastly, the timing of your purchase can have a huge impact on the overall process as well as the cost. You never know what opportunity might show up tomorrow. This is why you shouldn’t settle for less than you want, but instead wait for the right time to buy.
Make sure that the bank has pre-approved your loan and that your deposit is ready. Then, simply wait until the perfect opportunity arises. This will give you better negotiation power with the seller, knowing that you have the money ready. You will also be in a better position to beat out the competition to your dream home.
Even though it may take a while until you find the perfect home, it’s always best to be patient.
The Final Word
Buying your first home is no easy task. To make the process as smooth as possible, make sure to follow the tips above. The most important thing is for you to lay a strong foundation.
This means getting things sorted out with the bank ahead of time and doing your best at researching. Remember to take your time and go through each step carefully. Even though all of this may seem daunting, it’s actually something that you can do without a lot of trouble.
Make sure to find the right people for every step in the buying process. Surrounding yourself with experts will ensure that you don’t regret a single thing about buying your first home.