It’s now officially a buyers’ market, and we can hear every potential first-homeowner shouting – “finally!” It’s no secret that New South Wales property prices have been inflated by negative gearing and overseas investors in recent years, but we are finally witnessing a downturn in property prices. This is good news for those wannabe first-home buyers who have been saving every penny, potentially moving back in with mum and dad to save enough for a deposit, and now are chomping at the bit to get in the market.
As a borrower, you want to be confident that you have all your ducks in a row before applying for your first home loan. We want potential first-home owners to be informed and prepared for buying their first property, That is why we have created this simple guide to buying your first home.
How to buy a house - where do I start?
The best place to start is to do your research. You may also want to sort through your finances and figure out how much you can afford to borrow. You can do this by:
- Creating an excel spreadsheet of your current list of expenses, assets, savings and debt (this includes credit card debt and outstanding loans such as HECS-HELP)
- Forecasting potential costs involved with buying a home (this includes the cost of inspections and legal fees)
- Using free online resources such as calculators to assess your potential borrowing power
- Speaking to the experts and comparing loan terms (consider different lenders and take into consideration potential risks and rewards from each loans policy, both short-term and long-term)
What should you not do before buying a house?
Here are our top 5 things first-home owners may want to avoid before buying a new house:
- Accumulate debt: Avoid taking out additional loans if they are not essential and be sure to meet all your repayments for any outstanding loans. Be sure to check your credit score as well before making any loan applications.
- Make a career change: If you change careers, lenders will see your finances as less reliable and be less willing to risk lending any or as much money to you.
- Purchase interiors: Wait until you’ve purchased the property to buy anything to fit your new home. Firstly, you might change your mind once you’ve moved in and secondly, perhaps that Ottoman you have your eye on might be a little too extravagant once you’ve purchased your new home at 6 to 7 figures.
- Having many credit enquiries on your record: Be careful with the number of lenders making enquiries into your credit score. Lenders may be concerned you are attempting to take out numerous loans if they see you have had multiple, recent credit checks.
- Avoiding research: Doing your research may be boring, but it will save you money and a headache in the long run. Research the market, like which areas are more likely to offer a greater return and which lenders are reputable.
How much deposit do you need to put down on a house?
Generally, you need a minimum of 5% deposit of the purchase price. However, Greater Bank do offer the Family Pledge Loan which rather than needing a deposit, it requires a relative willing to put forward their property as a guarantee for the loan.
NSW first-home buyers do have the valuable opportunity to take advantage of the first home owner grant. To find out what you will need to be eligible for the grant, take our eligibility quiz please click here.
What to check before buying a house?
During open inspections, be thorough when looking over the property. Check walls for signs of water damage, drains for rust, walls for mould, tiles and plaster for cracks, ceilings for sagging, rooms for ventilation, sockets for damage and drain pipes for corrosion. Be comprehensive in your assessment and consider the property boundaries and positioning of the estate. | Greater Bank
- Research the area: By becoming a homeowner, you will become a part of your area and its community. It is important to do your research into the area. Has the council put in restrictions that make the area a poor investment, or is it an up and coming area with new amenities and increased public transport services? These are things every potential home owner should consider.
- Collect reports on the property: Zoning reports, strata reports, building reports – get your reports and read them! These are legal life rafts to ensure you don’t purchase your dream home to find out nearby developers are planning to build a high-rise that will block out your sunlight.
- Inspections are key: Your building inspection will provide you with your building report; a pest inspection will avoid any creepy crawly surprises; and a pre-settlement inspection allows you to look over the property on the day of settlement to ensure it is in the same condition as the day of purchase. The cost of the building and pest inspections will come out of your pocket, so it’s important to factor this in when trying to determine your financial viability.
What questions should you ask before buying a house?
Here are our top 3 questions to answer before buying a house:
- Can I live here? Can you see yourself living in this property for 5 years or more? If not, and you’re not purchasing a property for investment purposes, consider whether this property, and your loan, is a practical option.
- Can I negotiate? This is where your research skills will come in handy – find out how long the property has been on the market, why the current owners are selling, what their price expectation is and how much similar properties on the market are going for.
- Can I afford this? This is particularly true if you have fallen in love with a property that is above your original budget. Be realistic and consider the new loan terms for you to afford this property and if it will be worth it.
If you are searching for a new home and need expert advice, please call or drop in and speak to one of our mortgage experts today. They will help you assess your financial situation and help you decide which Greater Bank home loan best suits your needs.