A Guide to Home Loans For First Timers
Buying your first home can be daunting and if you feel that way, you’re not alone. It’s understandable because it will no doubt be the most expensive thing you’ve ever bought in your life, so it isn’t for the faint-hearted. It can be overwhelming when you apply for a home loan, not knowing which grants you might be eligible to apply for, how to get approved, let alone where to search for your home. Add to that the confusing jargon, but here are some tips to help you feel more confident:
Check your eligibility for a home loan
The first step is to make sure you’re eligible. To get an idea of how much you can borrow give a few lenders a call. You’ll get a realistic idea of what kind of home you can buy and where you can buy it if you know your borrowing limit. You can also check the Internet for a borrowing power calculator.
Do your research for options
You’ll find the market is complex and competitive when it comes to home loans. Shop around to find a rate that is competitive to make sure it’s not higher than average. Mortgages vary, and you can have a variable (rates change as the Reserve bank raises or lowers them) or fixed interest rate (the rate stays the same, but they’re usually higher) or an interest-only mortgage, depending on your circumstances.
Get your debts sorted and save for a deposit
You could find it harder to get the home loan you want if you have much debt, especially if you’ve missed payments and it has affected credit rating. Before you apply, it’s advisable to pay off as much debt as you can, or you could try consolidating your debts. Remember, credit cards are more troublesome than a HECs University debt. Also, you have to come up with a deposit, and the larger the deposit, the more likely you are to be successful in your loan application and the more you can borrow. A five or 10 percent deposit will perhaps get you a home loan, but usually, you will need 20 percent of the purchase price.
Calculate your costs and any concessions
There are many hidden costs to consider when buying a home, and that’s apart from home loan repayments. You need to calculate loan registration and application fees, removalist costs, building and pest inspections and conveyancer fees. Check whether you will pay any stamp duty and if you’re eligible for a grant. The states all have different rules but if you’re buying your first home in NSW e.g., the government changed the rules in 2017 as follows:
New rules in NSW
- Stamp duty abolished on all homes up to $650,000
- Stamp duty relief for homes up to $800,000
- Grant of $10,000 for builders of new homes up to $750,000, buyers of new homes up to $600,000
- Abolished insurance duty on lenders’ mortgage insurance
Check your state for grants and stamp duty.
Home buyers beware
Caveat emptor means ‘let the buyer beware!’ You wouldn’t buy a car without checking it for problems, so the same goes for a house. As the buyer, you are responsible for making sure you get what you pay for and that it’s in the condition stated in the contract. If there are necessary repairs, make sure you either have the cost taken off the house price or if you can live with them get a quote and add that to your extra expenses.
Alex Morrison has worked with a number of real estate agents for over 10 years. In this time he has worked with a range of businesses giving him an in depth understanding of many different industries including home decoration, improvement, renovation and sales.