If you’ve reached that stage in your life where you no longer want to live in rented accommodation and would like to have a home of your own in Western Australia, it’s time to begin your search for borrower-friendly home loans that will help you achieve your dream as a first-time home buyer.
However, before you get swayed by the first mortgage option that comes your way, here are six tips that will help you make sound financial decisions and pick an option that best suits your long-term interests.
#1 Find out if you’re eligible for a home loan
Before you start hunting for your first home, check your eligibility for a home loan beforehand so that you’re not left in the lurch once the process starts. If you don’t have savings to purchase a house, which few first-time homebuyers do, you’ll need to meet the necessary criteria to qualify for a home loan.
Contact multiple lending institutions to find out how much you’ll be able to borrow towards buying your house. Once you have several estimates, you’ll be able to make an informed decision regarding what type of property you can afford to buy in WA and in what locations.
#2 Learn about the various types of home loans out there
While most banks offer cookie-cutter property loans, private lending institutions offer more variety in terms of the type of loan options and their terms and features to suit varied borrower needs and circumstances.
Before you zero in on a financier, take the time to meet with qualified experts who can help you decipher the various types of loans—some examples are basic variable rate home loan, standard variable rate home loan, fixed and split-rate loans, interest-only home loans, line-of-credit home loans, low doc home loans, low deposit home loans, and no deposit home loans. Once you know what all is out there, you’re sure to make a better decision.
#3 Take control of your existing loans
If you’re presently in debt, lending companies may not approve your home loan easily or may not approve the amount you’re seeking. This is why, before you apply for a home loan you must first sort out your debt in order to get a better deal on home finance.
Once you’ve made up your mind about buying a house, start paying off any big or high-interest loans you have and work on improving your credit score. This could take a year or more depending on how much you owe, but it would be worth the wait. If possible, consolidate your debts into a single one, and reduce your credit card spending.
#4 Build a handsome deposit
Just like reducing your current debt, this is an important preparatory step on the road to owning a house of your own. When you have a good deposit to purchase a home, you will be able to borrow more from the lenders (a higher deposit amount assures lenders that you have the capability to pay off your mortgage). While you can pay a deposit of 5 to 10 % (which you’ll pay at the time of signing the sale contract), aim for a 20% deposit so you won’t have to pay mortgage insurance to your lender.
Moreover, if you have a bigger deposit, you’ll have access to lower interest rates. But saving to buy a house is a gradual and ongoing process, and the sooner you being, the better.
#5 Take additional expenses into account
When you’re calculating the cost of buying a home, there are several additional expenses you must consider to avoid unpleasant surprises later. These include stamp duty, building inspection charges, legal fees, pest inspection, lender costs, cleaning costs, moving costs, utility costs, mortgage insurance, and other insurances to protect your property (such as building insurance, mortgage protection insurance and contents insurance).
#6 Check if you’re eligible for the First Home Owner Grant
This grant is available to permanent residents and citizens of Australia who’re looking to purchase or build their first residential property. To qualify, the home should be your principal place of residence within a year of settling there. Eligibility requirements for this grant differ from state to state, so it’s best to contact the local authorities in your area to find out if you’re eligible and the amount you can expect to receive.
Also, check if you’re eligible for stamp duty exemption or other discounts. These concessions can save you thousands of dollars, which you can use to pay off the mandatory costs involved in buying a house.
Are you a first-time homebuyer and what are you doing to save?