Finance up front
Before you start search for that dream house it's a good idea to have the finance approved. Doing this up front will give you a good idea of what price range you can afford. You should also keep in mind the additional ongoing costs that you will need to allow for when owning a home, such as rates, insurance, etc.
The first step will be to calculate how much money you have for the deposit. Generally speaking, banks and other financial institutions will require a cash deposit of around 10 to 20 per cent of the value of the property.
Monthly mortgage repayments should be less than or equal to around 30 percent of your gross monthly income. When it comes to borrowing money to buy property, your current levels of debt, credit card bills, car payments and living expenses will all be taken into account. In an ideal world, these should also be less than or equal to around 33 percent of your gross income.
These days most banks offer "online" calculators, which can give an idea of what a lender may lend you to buy a property. But remember, these calculators should be used as a guide only. You will still need to make a formal application in order for your home loan to be approved.
Choosing a bank or mortgage provider can be a difficult task. A good place to start your research is the internet. Most mortgage providers have their own web site, where they list available loan products.
Fixed rate or variable
Some things to consider include whether the loan will be subject to interest rate changes (fixed rate or variable, and the period involved), how the repayments will affect your lifestyle and over what term the loan should be. Use the comparison rate tables, as these will show the effect of any additional costs such as loan establishment fees or early repayment penalties.
Once you've chosen your bank, you will need to make a formal application for a loan. Often the more information you provide to the lender, the faster your application will be approved. Your application will usually need to include proof of income such as pay slips, employment records, bank statements for any other loans or borrowings including car or personal loans, proof of your savings history and details of any credit cards. Remember to take into account any additional costs of home buying, such as solicitors’ fees, stamp duty, insurance, any government duties, building costs, maintenance or renovations.
House Hunting
Once again, before you start house hunting, do your homework. Think about what you need (as opposed to what you want) in your home. Is a small home or apartment situated closer to work preferable to a larger home further away from work but in a good “lifestyle” area? Take into consideration how many rooms you need, whether proximity to community facilities, schools and transport is important, or whether you are prepared to do renovations on the property in the near future. Make a list and stick to it!
Next, talk to a reputable real estate agent. Let them know what you're looking for and ask them to contact you if any properties fitting your criteria become available.
You can expect this process to take some time, as it may involve spending weekends inspecting properties. Look through local newspapers and surf the internet to get an idea of prices and what is available. Take notes about the homes you like – it can often be difficult to remember details later.
Once you've found the house of your dreams, you can start put in an Offer to Purchase. At this time it is important to make sure you understand what is included in the sale of the property.
Legal Matters
Once you and the seller have agreed on a price, you will be required to pay a deposit.
The next thing to do is consult your solicitor or conveyancer. Usually the solicitor will be provided with a copy of the sales contract by the seller's lawyer or agent. Your lawyer should check the contract and make sure it contains all required documentation, terms and conditions. The contract should include a copy of the property title and a list of any special conditions and inclusions (such as floor coverings, curtains, etc).
Your lawyer or conveyancer will look at the contract and explain the terms and conditions to you. Both you and the seller have a copy of the contract, and once any changes have been agreed to by both parties and implemented, the contract will be “exchanged”.
Settlement
The final step in the home buying process is settlement. This is when the buyer pays the balance of the agreed purchase price and, in return, the title deeds of the property are transferred from the seller to the buyer. The title deeds are then normally held by your lender until the loan is repaid. Before the final settlement, your solicitor should make sure any rates or taxes outstanding on the property have been paid by the seller up to the date of settlement.
When settlement is complete, you (or your lender) will receive a copy of the property title and, of course, a set of house keys!
Although the steps above are only a guide you can see home buying doesn't have to be overly complicated. Remember to do your homework, think about what you want in your new home and find professionals with whom you are comfortable. Most importantly, if you don't understand anything, ask!
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