When you decide to buy a house, it will become one of the biggest assets you will own, and this can be daunting and stressful. When looking for a home, there are many factors to consider as there is a lot of information out there, which can make it hard to determine what is important and what procedures you need to take.
As a first home buyer, this is an investment for your future, and finding a property that suits your needs can be incredibly beneficial. Finding your forever home, your next investment opportunity is an important part in your life, so knowing what to look out for and if you are making the right informed decision for your future and finances in the long run needs to be considered.
This article will give you a head start into questions you might be asking yourself. We explain what is required from you in terms of gathering the right information and research when it comes to the property you are interested in, and why a property valuation as a first home buyer is one thing that will be the key to making your final decision on your dream home.
How much can I afford?
When it comes to buying a house, we all have our own personal preferences and it’s important to consider how much you wish to spend and figuring out the amount you can afford. Consider your monthly income (from all sources) and any debt that you may owe currently.
You would then need to calculate after paying your monthly bills such as student loans or car payments, how much money would you have remaining. The difference between the amount calculated after monthly bills and the total mortgage payment is what you could potentially use towards the down payment if needed.
Although we all dream of owning a mansion on the hill or a beach bungalow, sometimes being realistic in the type of house and location is all dependent on your budget. Choosing a lower-priced home may also help when it comes to increasing your cash flow during the first few years in terms of utilities and repairs to the property that many owners forget to factor in.
Mortgage loan availability?
For first-time buyers, there are various loans available. The most suitable loan will depend on various factors that they will consider such as credit, money saved for the down payment and the length of time you plan to stay in the home.
FHA stands for Federal Housing Administration, if you have at least five percent or more for the down payment this type of loan can offer low interest rates and minimal fees.
LTV stands for “loan to value” is the ratio between what you owe on your home compared to its worth. With this type of loan, even if there is no money down or closing costs due at purchase time (which some lenders offer), it requires regular monthly payments so that your principal debt balance gradually lowers over time.
This option allows those who have enough cash saved up for their initial down payment as well as any fees like title insurance premiums and appraisal costs to get rid of their old mortgage.
When it comes to mortgage loans there are two options: a fixed rate or a variable rate. The type of loan you choose is one of the most important decisions you will make when purchasing a property. A fixed rate mortgage is the most used, as it offers homeowners some protection from the increase in interest rates every year.
The downside to this type of loan is that if you would like the payments to stay low after the initial period or to pay the loan off quickly by paying in extra a month, there is no room for flexibility in how much it will cost, which can be hard when it comes to your monthly budgeting.
With a variable rate mortgage, this has a higher risk, as monthly payments can increase over time. A variable rate has no pre-defined term, meaning your monthly payment can differ each month and you may end up paying more in interest rates.
When buying a home, it’s not just the actual price that you need to think about, there are monthly expenses like water and electricity bills, insurance as well as council or state taxes.
Many of the payments may be more frequent than others, it’s important to budget for these additional costs when determining the amount needed for any upfront costs when purchasing your new home.
Home Inspection/Property Valuation?
When you’ve found a property that you are considering buying. A home inspection, other wise known as a property valuation is a process in which a qualified senior valuer will inspect the property and conduct a comprehensive detailed report on the true value (worth) of the property as well as the market analysis of factors to consider like the area, location, size, and sales of properties similar to the subject property you are interested in.
This type of property valuation is called a pre-purchase valuation. The report will outline the true value determined for the property and any existing problems that could be fixed prior to purchase if you wish to negotiate with the owner as well. Secondly, inspections act as reassurance for buyers, so they have an insight into what they may be purchasing then there are no future surprises down the line.
Even though buying a house can be daunting it is still an exciting journey, having the right amount of knowledge, understanding and professional advice will make the process less stressful and more enjoyable. Your property is your biggest asset and depending on what requirements are needed for your property valuation whether you’re a first home buyer or a property investor there is a service that can be tailored to you, with the right advice and information you can save thousands and be prepared for any potential risks that may arise in the future.
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John Anderson is one of Melbourne’s leading experts in commercial and residential property valuation services. John is a registered Chartered Surveyor and Senior Property Valuer with over 20 years of professional experience providing property valuations across Melbourne and Victoria. His in-depth expertise in real estate and property has allowed him to share his specialised knowledge as an authority keynote speaker at conferences and universities across Melbourne.