If you’re thinking about home ownership, there’s probably one question on your lips: Am I ready? So how do you know when the time is right? Here are three questions to ask yourself before making the jump.
1. Are your finances sorted?
With the median dwelling price rising across the nation, purchasing a home requires a fair chunk of financial commitment. To secure a property on most occassions, you’ll probably need to take out a home loan. To do this, lenders typically need you to save around 20 per cent of the purchase price, or with a lower deposit pay the premium on lenders’ mortgage insurance .
It’s a good idea to give yourself a buffer, as well, to allow for additional costs, such as stamp duty, solicitor fees and loan set up charges. It’s also a good idea to talk to your lender about having your loan pre-approved.
By gaining pre-approval you’ll have a clear idea of what you’ll need to repay and how much you can afford to pay for a property – a useful step towards bolstering your finances for the future and setting a solid savings goal.
2. Do you know your credit score?
Have you ever thought much about your credit history? If you haven’t, you’re not alone. According to a survey by credit reporting agency Veda, some 78 per cent of Australians have never checked their credit history – and 79 per cent aren’t concerned about what might be on it.
However, knowing what’s contained in this document can actually be a big advantage. It’s a record of all the times you’ve applied for credit, be it a car loan or other personal loans, bank accounts, card balances, as well as missed payments or defaults. These tidbits are summed up in a score, which a lender uses to judge your home loan application.
It’s a good idea to check your file before applying for a home loan. If there are any errors, you have the chance to correct them – and it also gives you the chance to look back on your history and improve your habits.
3. Do you understand the market?
You’ve heard it once, and you’ll hear it again: Preparation is the key to any property purchase. If you understand the market before diving in head first, you can avoid falling into the trap of buying where you can’t afford.
Have a chat with your real estate agent, and consult our free Property Insights App. Is demand outstripping the number of properties available for sale? This might mean vendors have the upper hand at the bargaining table, which means you’ll need to adjust your approach.
Take a look at sale prices, rather than advertised prices, too. This can give you a more accurate idea of how well vendors are doing – and whether you might end up paying more than you expected when the hammer falls.
For help working out how much you can afford to borrow, as well as guidance through the home loan application process, our team of lending experts at Police Bank are happy to help.