Have you recently been asking yourself the big question… Am I ready to purchase a home? Take the following signs as evidence that YES, you are indeed ready for home ownership, or maybe you will be very soon!
1. You have been saving
Since buying a property is a big transaction, you may be considering a bank loan or some sort of financing. To be eligible for a home loan, in most cases, you’ll need to have a cash deposit of around 15% to 20% of the value of the property. You’ll also be required to pay additional expenses like stamp duty, solicitors fees, building inspections, home loan establishment fees and settlement costs. For that you can anticipate an extra 2% to 7% of the value of the property. Some of these can be rolled into your home loan when the time comes, but others need to be paid up front. Having extra savings as a backup for emergencies is a great idea, then you’ll never have to worry about missing a monthly payment if something urgent comes up. But practically speaking, in order to get the loan for your dream home approved you will have to at least have savings for your deposit and home loan-related expenses.
2. Your finances are clear and under control
This does not mean your finances need to be perfect, or that you must have achieved financial guru-status. It simply means you understand how much you earn every month and how much you are spending (and where the money is going). It also means that based on the numbers, you understand how much you can afford to repay each month. The well-known rule of thumb for this is to keep your loan repayments equal to or less than 25-30% of your income. Lenders also love a history of savings, it shows them you can consistently put away the same amount each week (as if you were paying off your home loan), so the longer you have a clear savings history, the more likely your loan is to be approved.
3. You’ve done the research
There are many things you can do to get to know the housing market and the dream home you’re looking for before you buy, including the following:
– Consider meeting with a real estate agent to understand the market and get ahead of other buyers.
– Ask questions of people that have recently purchased property, but don’t settle with the first advice or point of view you receive.
– Research the market and demand in the areas you are interested in living in.
– Assess your cost of living and lifestyle needs, and think about what you and your family really needs in a home… do you really need that bigger house with a spare guest bedroom for an extra $100k?
Doing your research and knowing the market and tricks of the trade can save you thousands and ensure you are getting exactly what you need and can afford!
4. You have a good credit history
Lenders will always consider the risk associated before lending you money. They do this by checking the number of bank accounts you have open, your payment behaviour in previous loan repayments, your previous loan application history (approved and not approved applications), and your current debt. All of this is recorded in your personal credit history file and will be used to support or to hinder your loan application. If you have always paid your bills and debts on time, great! If you have defaulted on loans or not paid outstanding bills in the past, you could find it harder to convince a lender why they should lend you money and trust you are going to pay them back.
You can access and check your personal credit history file which may help you decide if you are ready or if you would prefer to spend more time bringing your rating up before applying for a loan. Professional advice on this one can be extremely helpful, as all lender requirements are different… let us know, our team can help!
5. You understand there is never a perfect time
Many buyers wonder when is the best time to buy a house. Most talk about the market and “getting in at the right time”, to capitalise on their purchase long term. This relies on complex economic theories as well as some speculation and luck! In my opinion, the best time to purchase is when you feel ready and committed to buying the home you want to live in, financially and emotionally. Of course the practical side of also having the required funds and loan approval is vital. Finally of course… the perfect time is when you have found the right home for you!
If you feel you’re ready to purchase a home, or you would like advice on any of the above, give our team a call on 1800 3 PEASY or contact us via our website www.peasy.com.au for a chat about how we can help you get there!