Thinking about buying your first home? This is the biggest financial milestone in most people’s lives. There’s palpable excitement as you contemplate your name appearing on a property ownership document for the first time. But there’s also some anxiety as you imagine all the things that can go wrong — from mortgage default to hidden structural problems.
Buying real estate for the first time is a decision that should get you firmly on the path to financial independence and security. However, that can only happen if your purchase is well-thought-out. There are dozens of factors that determine your first home purchase, but the following four questions are arguably the most essential ones you should ask.
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1. Do You Qualify for any First Time Home Buyer Grants?
Before you start to think about the mortgage facilities you can draw on to facilitate your purchase, find out if you qualify for a first home owner’s grant or program. Most first time buyers don’t have vast resources at their disposal, so keeping their costs at the absolute minimum is critical. A first home owner’s grant allows you to redirect your limited cash to other expenses, such as home renovation and remodeling.
The availability of a first home owner’s grant depends on where you are buying the home. For instance, Australia has a first home owner’s grant that is accessible to citizens and permanent residents buying property in the country.
What Mortgage, If Any, Do You Qualify for?
Once you are sufficiently informed about the grants and programs you are eligible for, the next logical step is to explore your mortgage options.
Unless you are one of the lucky few who can afford to buy in cash, you’ll need a mortgage. If you can get preapproved for a mortgage, all the better. This helps you narrow your search to homes you can afford. Without a pre-approval, you might waste precious time looking at houses outside your realm of affordability.
There are several reasons why you might fail to qualify for a mortgage pre-approval, including a low credit score, late payments, bankruptcy, low income, and other loans you already have. Seeking pre-approval is an opportunity to address any errors that may incorrectly disqualify you. It’s also a chance to commence a cleanup of your finances, allowing you to qualify for a mortgage in the near future.
2. What Savings Do You Have for the Home Purchase?
There are several costs you’ll incur when buying a home, including down payment, bank appraisal, homeowners’ insurance, and taxes. While a mortgage will cover most or all of the home’s purchase price, you’ll need savings to cater for the other costs.
You don’t need tens of thousands of dollars in savings to buy your first home, but the more your savings, the easier and less expensive your journey will be. If you aren’t clear how much savings will comfortably cover the costs, get in touch with your banker. They should walk you through the mortgage you qualify for, your expected repayments, and what cash you need to have to complete the process.
3. Where Do You Want to Buy the Home?
As a first time buyer, just getting your foot in the door of the property market is an achievement. But you shouldn’t settle for just any home. A house purchase is a large, long-term commitment. Though your thoughts at this point are fixated on the purchase, don’t take your eye away from the prospects of selling the property in the near future. In this regard, location is key.
Chances are, your mortgage pre-approval makes it possible for you to buy a home in various neighborhoods. That doesn’t imply all these locations are equally viable for your medium- to long-term financial plans. Location is not just about future selling price and demand. It’s also about access to key services such as good quality public schools.
Satisfactorily answering these questions will get you on the road to making the right decisions as a first time home buyer.