It’s an exciting time. You’ve saved really hard and have a deposit ready to buy your first home. You’re ready to take the plunge. But buying a home isn’t a particularly smooth or easy experience for most people, and if it’s your first time, it can be even more complicated and overwhelming. Take a minute to remember that all homebuyers go through similar confusion and concerns; the only difference is that at least they’ve done it before.
So when you’re ready to jump into the property market, take a deep breath and spend some time doing research. The better prepared you are, the easier the whole process will become. It still might be a slightly bumpy journey, but at least it won’t be quite as bad. You’ll also reduce your risks of a total disaster.
Step 1 - Check Your Finances
I spoke to a realtor once, and he said that the number one mistake first home buyers make is that they don’t make sure their finances are in order before they start looking. In other words, they get too far ahead of themselves. They find the home of their dreams, only to discover that they can’t get a loan after all. So save yourself some heartache - make sure your deposit is sufficient, and that you DO qualify for roughly the loan you think you’re going to need. Some lenders will even pre-approve you for a loan, which simply means that they assess what size loan you can afford, and unless you’re hiding something or your financial situation changes drastically in the meantime, they will give you a loan.
Going through the process of applying for a loan will also bring to light any issues with your credit report. If you know about it now, you have time to clear up any mistakes or irregularities, long before you actually need the loan.
Once you have a budget - stick to it! Looking at houses you can’t afford will only lead to disappointment.
Step 2 - Research
Okay, research is a word, a bit like budget, that tends to send a lot of people to sleep. But it’s really important to know what you’re looking for before you start looking! There’s no point going to look at houses unless you know how many bedrooms you want, what kind of house you want, where you want to live, and so on. Sit down and brainstorm some questions you can ask, so you don’t waste time looking at a property that just isn’t going to suit you. Some questions to think about include:
How many bedrooms do we need - now and in the future?
Are there schools close by?
Will it be convenient for work, or will I need to spend too much time commuting?
Is it a safe neighbourhood?
Does the house need extensive repairs or renovations?
Is their public transportation close by?
Is it in an area where it will hold its value, or even be worth more if I sell it in a few years time?
Step 3 - The Real Estate Agent
Once you know the area you want to buy in, take some time to research the local real estate agents. A good real estate agent will be very familiar with the housing market in that area, and should be patient enough to answer any questions you have about the process of buying a house. The stronger the relationship you have with your agent, the better the experience is likely to be for you. An agent who likes you and is keen to help you find the perfect home is worth his weight in gold.
Step 4 - Making An Offer
Now you’ve found the perfect home, it’s time to take the big step and make an offer. This can be a frightening and difficult step, so take your time. It can also be stressful, because as a buyer you have a budget you want to stick to, but the seller wants to get the best possible price for the house. So often there’s a bit of negotiating to get through before your offer is accepted. Take your time, keep cool, and in the end if the seller’s price is out of your reach, be prepared to walk away. The buyers who pay too much are always the ones who fall in love with a house and get themselves into financial trouble because they let their emotions lead them into a commitment they can’t afford.
It’s also important to read through any contract before you sign it. Make sure it includes what things will or won’t be included in the purchase, such as appliances. If you want to get any inspections or reports done, make sure you give yourself the option to cancel the contract if those reports detect major issues. NEVER accept the agent’s word that something is covered or included - it MUST be in writing.
Step 5 - Home Inspection
Buying a home is a huge financial commitment, and the last thing you need is to have huge repair bills the day after you move in. So make sure you get a home inspection. Sometimes you can arrange to get this done before finalising the contract, other times it occurs after it’s finalised. Personally, I always sign contracts subject to an inspection. Check with your legal adviser if you’re not sure, but it’s worth have a clause prepared which gives you the right to cancel the contract without penalty if a major problem is found in a home inspection within 14 days. If major issues are discovered, you then have the choice of cancelling the contract or perhaps negotiating a better price.
Step 6 - Closing the Deal
The most exciting moment of all - the ownership of the property is transferred to you, the buyer. Closing the deal, or settlement, can also be a time when all of a sudden the size of the commitment you’ve just made can hit you in a big way, and lead to buyer’s remorse, or doubts about your decision. Did I pay too much? What happens if I lose my job? Maybe I should have waited a bit longer to see if something better came along… There’s hardly a homebuyer alive who hasn’t thought most of those things, and plenty more, at some time between signing the contract and moving into the house.
Just remind yourself why you chose the house, and trust that you made the right decision.
For tips about choosing the right home loan, check out Home Loan Zone Central
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