1, Review Your Credit Score
We've all heard about a credit rating and the strange mythical creature it can be but in short your credit score is a reflection of your financial habits. The more you have in bad debt (Afterpay, payday loans), missed payments or loan applications the lower your score will be. So by never missing a payment for a bill or loan and not getting into bad debt your score will rise.
Unfortunately, as this is something we never really consider nor is it something that is bought to our attention (until you apply for a mortgage) it's quite common to find an old phone or utility bill you thought that was closed still open with an unpaid debt of a small amount. Although this unpaid bill might only be for $1 it still has a bad effect on your rating. In general, a score of 700+ is good and anything below that needs your attention to try and improve.
2, Save A Deposit
As a general rule of thumb you should be aiming for at least 5% of the purchase price plus closing costs. In an ideal world, you should be aiming for a 20% deposit as this lowers potential fees (Lenders Mortgage Insurance) and makes you more attractive to more banks and lower interest rates.
Sometimes it's more effective to clear debts first before trying to save cash in the bank. If you have multiple debts try using the Avalanche or Snowball method to help speed up the process.
3, Prepare Your Budget
This is an important step many people skim past but there's more to buying a house than just saving for a deposit. Understanding your monthly budget and where your money goes although sounds like a boring exercise might actually help you sleep better at night, and help you save for a deposit quicker.
How will your new mortgage repayments affect your monthly budget and lifestyle? Don't forget the additional expenses of owning a house such as Council rates, maintenance and insurance. If you need help reach out and we can send you a copy of our basic monthly expenses sheet.
4, Find Your Mortgage Product And Get Pre-Approved
Many people talk directly to their bank assuming they will give them the best rate as they have been a loyal customer. Unfortunately, this isn't the case and your bank can only offer you what they have available, which might not be suitable for you. As a broker we have access to over 40+ lenders and can compare rates and loan features across a wide range to help you narrow down something more suitable. Don't forget sometimes the cheapest rate might not be the best option!
Once you have found a suitable lender and product your broker will help you apply for a pre-approval. This requires you to submit all your paperwork to the lender where they will do a full assessment and approve you for an agreed amount. This will give you the confidence to put forward offers and move quickly with the sale and have a minimal finance clause.
5, Consider Closing Costs
This is probably one of the biggest things we see people overlook and should be added to your initial deposit. Closing costs are not cheap and in general, will cost you around 3% - 5% of the purchase price which is generally paid upfront. Don't forget you also need to make sure you have enough money left over as a backup fund. Lenders will review your full financial position and if you don't have these closing costs they won't lend you the money.
Some of the most common closing costs are; Stamp duty, Government fees, Council rates, Mortgage fees, Title registration fees, Removalists, Solicitors, Legal Fees and Building & Pest Inspections.
If you're thinking of buying and need help to get your finances in order or just after some free advice then contact us today to see how we can help.
WARNING: The contents of this communication are not designed to replace credit advice. We have not taken into account your needs, objectives or financial situation.
Comentários