For anyone who has been dreaming of the day when you can finally call a house your home, you know full well that this is kind of a big deal.
Buying a house is the end goal, but it’s also the final step along an enormously long path of preparing for homeownership, which is not something that comes about over a weekend. Basically, there’s a lot that’s involved in getting yourself prepared to buy your first home, and it’s good to know where you’re at if you’re serious about taking the next step.
So how do you know if you’re truly ready?
You’ve done your homework
This means that you know what you’re looking for, you know what you can and can’t afford, and you know enough about the housing market to confidently navigate your way around. Having a good understanding of these things is going to be essential when you take that final step and start scoping out your chosen property. Firstly, you’ll need to know exactly what you can afford. An affordable mortgage repayment shouldn’t be more than 30% of your monthly income. If you’re doing the numbers and it seems too high, you might want to reconsider the area you’re looking in or the size of the property you’re after. If you’ve nailed down exactly where you want to buy, then you’ll need to start researching the median sale prices compared to the listing prices and the overall popularity of the area in question, since this will have a huge effect on demand and value. If you’re a bit lost then it’s never a bad idea to talk to someone who knows the ropes. Local real estate agents within a given area will have all the goss and likely be happy to give you all the information you’re looking for. If you’re lucky they might even let you in on some lesser-known listings for sale that you’d never have found otherwise.
You have secure employment
Having a permanent full-time job is going to be high on the list of factors that lenders will use to determine your eligibility loan approval. First and foremost, having a secure, well-paying job is going to show that you have the means to successfully make your repayments and are able to afford all the other finances that go along with owning a home. Secondly, having a sound history of solid employment is going to prove that you’re reliable and consistent, which is an incredibly important aspect for any candidate applying for a home loan. Financial providers will swoon over a steady employment status and solid work history. Things can get a little trickier if you’re self-employed but the same principles mostly apply – you’ll usually just be expected to supply more information documenting a reliable stream of income over a certain period of time.
You’ve saved up the down-payment
Yes, that old chestnut. It might go without saying but saving up that dreaded housing deposit is going to be one of your biggest hurdles. More than likely you’ll be applying for a home loan in order to purchase your new property, and in order to be successful, you’ll also need to provide a 15-20% deposit of the property’s value. If you haven’t quite managed to save up for the down payment at this stage don’t fret! Take it all in your stride and be proud of how far you’ve come. Remember also that this is the hardest part, so when this is done, you’re on easy street.
Your credit rating is top notch
In the world of money lending, credit ratings are everything. Applying for a home loan is no different. Your approval for that mortgage is likely to rest of the very foundation of whether your credit rating is deemed good or bad. When trying to determine your likelihood of home loan approval, a financial provider will generally check your credit rating off the bat. By doing so they’ll be able to see your history of loan applications, how many credit cards you own, how much money you own, if you’ve ever failed to make a repayment, and any other shady financial errors you’d rather sweep under the rug. Despite the fact that we’re only human and no one is perfect, you’re still going to need a good credit rating to be approved for a home loan, so do yourself a big favour and pin down exactly where you stand in the eyes of the credit rating gods. There are free online credit checks available at your fingertips, so don’t hesitate. If you find that you’re in a bit of a pickle then it might be time to speak to a financial adviser to get you on the right track.
You have a stellar rental history
If you’ve been living at home with mum and dad for the past 4 years specifically for the purpose of trying to save up to buy your own home, never fear. Having a good rental history is not a necessary prerequisite to getting approved for a home loan, but it does help. Being able to show that you’ve been consistently paying rent for a significant period of time makes a very good impression since it follows the same principles as paying off a mortgage.
So, are you ready to take the homeownership plunge?
If you’ve gone through this list and given each section a mental tick then congratulations, you might as well pop that bubbly tonight. If, on the other hand, you hit a few stumbling blocks going through each of the preparedness points, that’s totally OK! Buying your first home is no walk in the park, it takes a massive commitment and an exceptional amount of hard work – both of which do not come quickly or easily. Wherever you are on your journey, we’re rooting for you. You’ll get there in the end and we’ll be cheering from the sidelines when you do.