The prospect of buying a house is exhilarating, especially if you are looking to buy a property for the first time. Besides, you will finally be able to get a pet, hang pictures wherever you please and paint the kitchen yellow if you feel the urge. As a bonus, owning your own place means no more surprise visits from your creepy landlord! The grass certainly looks greener on your own lawn, doesn’t it? But the reality is that buying a home for the first time can come with a lot of uncertainty. Not sure where to start? Here are eight things you need to know about or do before you make an offer to purchase your new home.
Unless you’ve saved a huge amount of money and can pay for your new house in cash, you will probably need to get a loan for at least a portion of the cost of your new home, if not the whole amount. Your credit score will play a central role in whether or not you are granted a home loan, and for how much you will be approved.
That’s why it’s essential to keep your credit score in as good a shape as possible. If you have a couple of credit accounts (store accounts, credit cards, loans) on which make regular payments and have never defaulted on a payment, your credit score should be looking good. However, if you are not sure or you know that you may have a tarnished credit score, it’s a good idea to check your credit score. You are eligible for one free credit report a year. Once you know what needs fixing, you can set about improving your score - before you apply for a home for a home loan.
It’s easy to get caught up in the excitement of buying a new house without understanding what you are able to afford. However, one needs to remember that there is more than just the purchase price that has to be considered. Beyond the initial costs of the purchase, you need to fully understand how mortgage repayments and the costs of owning a house will affect your ability to pay for future expenses (such as a new car, school fees, retirement plans and other investments). To ensure that you have done the calculations, it’s a good idea to do a small forecast of costs and set up your own personal cash flow model for this purpose. This way, you are better equipped to make a wise decision on how much you can actually afford to pay for your property.
The price for which a seller agrees to sell their property is not an accurate estimate of what you will pay for the purchase of a property. There are a myriads other costs you might not have thought of yet, such as levies, transfer duties (which can add up to a whopping 10% of the price of the house) as well as any rates and taxes. It’s important to find out about these costs upfront so that you have a clear picture of the total cost of the property.
One of the surefire ways to strengthen your bargaining power is to ensure that you’re pre-qualified for mortgage finance. This proves to the seller that you’re serious about buying a home. It can help you to get a lower offer accepted if the seller knows that it will be a quicker and easier to sell to prospective buyer who has already been pre-qualified for finance. Being pre-qualified for a home loan will also give you a better idea of what you really can afford, which will help you to streamline your search.
Before you start viewing properties, it’s important to do research into the best possible areas, taking into account, your budget, preferred type of property, security, city plans, recent trends, public transport and amenities - restaurants, shops, ect. You must consider the location very carefully because you can always change something you don’t like about a property, but you can’t do anything about the location.
Before signing on the dotted line, ensure your chosen property is structurally sound. The last thing you want is to put your life savings towards your dream property only to realise too late that there are structural defects that were covered up with ‘quick fixes’. That’s why it’s a good idea to hire a specialist to inspect the house before the purchase goes through. Make sure that they take their time and pay attention to things like electrics, plumbing, the roof and any structural defects.
To reduce the overall cost of your mortgage, the wisest thing to do is to opt for a mortgage that is as short as possible. While this implies higher monthly payments, it means that you will own the property in its entirety sooner and save a lot of money in the long term (because of the interest you will have to pay on a long-term home loan).
The offer to purchase is a legal, binding document and you could get yourself into a lot of financial trouble if you are in breach of it. That’s why it’s essential to understand it in its entirety. Technically, the estate agent should take you through it point by point to ensure that you understand everything. If they don’t, it’s recommended to employ the services of an attorney to make sure that you fully understand the offer to purchase.
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