There are many tricks and tips to buying a property, but there’s one essential element that no one can avoid – getting your finances in great shape.
Knowing what you can afford is a critical element of finding your first home or the next one that takes you higher up the property ladder.
As an experienced local agent, I know that the most successful buyers begin their search with their finances in order and a pre-approval letter from their bank or lender. They know their budget and tailor their efforts accordingly.
There’s no greater waste of time than visiting properties that, as it turns out, are beyond your price range.
Finding the right type of loan requires research of the various banking products, or you can short-cut the process by using a mortgage broker.
These brokers offer an array of products and have detailed market knowledge. They’ll be able to suggest the loans most suitable to your circumstances. They will also assist you with paperwork, obtaining credit histories and so on.
First-timers should also seek out any available grants and tax exemptions from state and local governments that are designed to help them to enter the market. These offers can add up to thousands of dollars.
I always recommend to my clients that they obtain a pre-approval letter from a bank so they are confident they’re looking only at properties they can afford. It also gives the seller and their agent confidence that you’re a serious buyer. This helps you in the negotiating phase.
If you are currently in the market for a new property, I would be delighted to help you with your search. In the meantime, I have listed a few tips for securing the finance that will help you find your dream home.
- Clarify your finances – A first-time buyer will ideally have 20% of a purchase price to get the best interest rate and conditions for their first loan. Money for legal fees, property inspections and taxes need to be set aside, too.
- Low barrier to entry – You can obtain a conventional loan with as little as 3% of its total as your deposit. Some government-backed loans do not require a deposit.
- It pays to save – The more you save, the less you borrow. And that means lower your monthly repayments for you over the term of the loan.
- Go for a grant – First-home buyers should research the current grants from various levels of government that are designed to encourage them into the market. Individuals who have not owned property in the previous three years may also qualify for a grant.
- Credit crunch – You’ll need a good credit history to be attractive to lenders. If your track record is not the best, you need to fix it up. A mortgage broker or an accountant can set you on the way. If errors appear in your credit history, dispute them immediately. A good record will reduce the interest rate a lender might charge you.
- Find the right loan – You can save thousands of dollars by choosing the right mortgage product for your situation. Shop around and make a note of not just the interest rate but the fees that come with it. Alternatively, secure the services of a mortgage broker to help you through this process.
- Be pre-approved – A written undertaking from your lender will help you focus on what you can afford, as well as signal to a prospective seller and their agent that you’re not kicking tires. Watch out for lenders who will only “pre-qualify” you, as this represents only an estimate of what you can afford and does not offer any guarantees of intention to lend.