Steps to Buying a Home
Buying a new home is a scary, yet exciting step. It requires careful planning, a lot of research, and proper budgeting.
Below is some vital information to help you know if you are ready to purchase your own home, and if so, tips for finding and financing the home of your dreams.
Knowing When You Are Ready to Buy a Home
Owning your own home is a great opportunity, but before you rush into any final decision, you want to make sure you are ready to make this big purchase. Here are some things to look at to determine if you are ready to buy a home.
- Down Payment. Many lending agencies will require you to have an average of 20 per cent to put down on your home. Some agencies offer loans with a smaller down payments, sometime as little as 5 per cent, but usually the interest rates are much higher on these loans. You should wait to purchase a home until you have a 20 per cent deposit plus money for the closing costs.
- Employment History. You should have a steady and reliable source of income. Lending agencies are going to want to see that you maintained the same job for several years and that you are bringing in regular income.
- Savings History. You should also have a household budget set in place that includes savings. You should be consistent with your savings and have a proven track record that shows you know how to save successfully.
- Pre-Approval for a Home Loan. Before you start looking for homes to purchase, you should meet with your lending agency to be pre-approved for a home loan. Shop around to several different lenders to get the best rates. Ask for a Key Facts Sheet for each loan available to you. All financial lenders are required to provide you with this document, which makes it easier for you to compare loans. If you are not pre-approved, the agency will probably provide you with different things you can do to build up your credit and qualified for a loan.
- Extra Savings Plan. It is a really good idea to have an extra savings account set aside in case of an emergency. This fund can help cover some of your household expenses if you ever have an emergency.
Help for First Time Home Buyers
If you are a first-time home buyer, there are several special governmental programs designed just for you. Here is a look at the two most popular programs.
- First Home Saver Account. This is a special savings account that you can open to help you save money for your first home. The government will match up to 17 per cent of your contributions, up to $1,020 each year. You must maintain this account for four years before taking money out, and the funds must go to purchasing a new home. This is a great way to save money for you home at a faster rate.
- First Home Owner Grant (FHOG). This grant helps to offset some of the costs involved in obtaining your first home. Each state and territory operates their own separate program and the amount of the grant varies by location, as do the requirements to obtain the grant.
Setting Your Price Range
Once you have decided that you are ready to purchase a home, you now need to determine how much money you can afford to spend on your home. Here are some factors to take into account when setting your price range.
- Money Down. The amount of money you have available to put down on your home will greatly affect your price range. Add in any grant money that you may receive as a first-time homebuyer. The more money you can put down, the higher home loan you will be eligible for, and your regular payments will be lower.
- Budget. Look over your budget carefully and determine how much you can afford to pay each month or fortnight on mortgage payment. When looking at your budget, be realistic about your expenses. You certainly do not want to purchase a home that you cannot afford to live in comfortably.
- Expenses for Buying a Home. When setting your price range, you also need to take into account the added expenses of purchasing a home. This includes the stamp duty charge, legal fees, maintenance fees, moving costs, and utility bills. A trusted professional like Roofs by Rodger will be a valuable resource for home repairs and preventative maintenance.
Stamp Duty Expense
You will be required to pay a stamp duty when you buy your home. The cost of this expense will be based on the purchase price of the home and the state or territory where you live. If you are first-time home buyer, you may be entitled to a stamp duty concession. Check with your local authorities to see what the stamp tax is in your specific area.
Tips for Finding a Home
Finding the right home for you will take some time and some research. You want to make sure you take your time to find the home that is perfect for you because it is probably the most expensive purchase you will ever make. Here are some tips for finding the right home for you.
- Right Price Range. You have already set a price range for your home, but now you must stick to it and shop for home that meets this criteria. The Home Price Guide monitors the home sales price in different suburbs in Australia and is a good resource to find the right neighbourhood for you.
- Location. You also want to consider the location of any home your considering buying. Ask yourself questions like; How close is it to your work? What are the schools like? Is it a good neighbourhood?
- Research. Finally, do some research on the house before you make a final decision. Also, consider the condition of the property and if you have the time and money to make any necessary renovations. Have a home inspection done to make sure there is no major problems with the home.
Cooling-Off Period
It is important to remember that in Australia, you are given a five day cooling off period to change your mind about the purchase of your home. You may lose some of you deposit if your opt out of the sale, but depending on your situation this may be the best alternative.
