What to know before you inspect: house buying tips for newbies

Buying a house can seem like a daunting task when you’ve never done it before! Besides finding an actual place in your budget there is all the conveyancing, settlement and loan applications to think about. Read below for some tips to get you started and help you get organised before you make an offer or buy at auction.

Paperwork

Although it’s tempting to start looking at properties right away, many buyers find that they save time overall by having their finances in order first. To do this you should prepare a realistic budget of all your outgoings and income. You’ll also need proof of income to show to lenders: this could be payslips or PAYG statements depending on your type of employment. You will also need forms of ID like your license and passport as well as proof of your deposit. For many people this will be a bank statement showing the cash you have saved up. If you have closed credit cards to boost your credit rating, you may need a letter of closure also if you are looking at a mortgage at a different bank to where you currently hold accounts.

Consult the experts

Once you have all your admin sorted, you can choose to approach lenders directly (like banks and credit unions) or engage a mortgage broker to help you out. Providing all the info discussed above will enable them to assess how much money you can borrow, determine what your buying limit is and what your mortgage repayments will be. Good providers will check your eligibility for things such as the first home owners grant if you’re in Victoria or other Australian states. Stamp duty reductions may also be available which will also increase your spending power.It’s advised to also get forecasted repayments based on a rate rise to give you an idea of how much extra you need to pay if interest rates increase.

Loan type

There are several loan types to choose from and options within each of these categories. The main difference to be aware of firstly is interest only or interest + principle. Interest only will result in lower repayments on a monthly basis, but you’ll never pay down your loan’s balance. It is not the right choice for everyone, but is more common in investor scenarios. Interest + principle you will end up owning the property outright at the end of the loan term, a dream of many Australians heading into retirement!From here you may get a number of financial products associated with your loan like credit cards or offset accounts that will reduce the amount of interest you pay on your loan if you pop spare cash in it regularly. Although it may not seem realistic at present, a mortgage that allows additional repayments can be a great way to reduce interest over the life of the loan. Even little top ups of $50 here and there can make a difference so select a product that allows this.