No matter what type of property you’re looking to purchase, knowing how to buy real estate may stop you from making serious mistakes. House-hunting is an exciting process, but getting caught up in that excitement often leads to errors. In this guide, you’ll learn what to avoid when applying for a mortgage.
Failing to Seek Pre-Approval for a Home Loan
Though it’s easy to call a bank and ask about qualifying for a mortgage, this step might not be enough. With mortgage pre-approval, you’ll know just how much money you can safely borrow. After all, there’s almost nothing more disappointing than finding the perfect home, only to discover that it’s unaffordable. Pre-approval allows you to concentrate on finding a home that’s within your budget.
Not Learning About Your Options
There are dozens of mortgage loan packages on today’s competitive market, and more arrive every day. Therefore, by visiting No1 Property Guide to learn about mortgage loans, asking about their features, and knowing exactly what you want, you can get a better deal.
Failure to Prepare
A little knowledge is a powerful thing, and as far as mortgage loans are concerned, organised paperwork is just as important. Australia’s Mortgage and Finance Association has thousands of brokers, and most of them believe that organised clients are more successful. Stay up-to-date on paperwork and have your supporting financial documents prepared when you’re making a formal mortgage application.
Borrowing Up to the Limit
Whilst most lenders will give pre-approval for a certain amount, there’s more to consider. Think of the prevailing interest rate; is it affordable? Set your purchase budget at 3% less than the current interest rate to allow for rate fluctuations, and save enough to cover up to a year of mortgage payments. Consider borrowing only the amount with which you’re comfortable, leaving a bit extra to account for rate increases.
Focusing Only on Big Lenders
Where home loans are concerned, approximately 80% of Australians go with one of the country’s “big four” banks. An established lender may offer a feeling of security, but narrowing your choices may make you miss out on a smaller lender’s more flexible terms or better value.
Relying Exclusively on Agents
Successful home buying requires a proactive approach. You’ll need to do your own legwork by looking at homes and market areas yourself. Although a real estate agent can give you a unique local perspective, it’s important to see things through your own eyes. Visit the local council to learn more about development and infrastructure projects. With a bit of research, you’ll be ready to use your loan funds wisely.
Not Scheduling a Pre-Inspection
Regardless of your potential home’s age, it’s important to have an inspection done when seeking financing. These checks, when carried out by qualified people, ensure the structural integrity and quality of the home you’re buying. With an inspection, you’ll avoid owing money on a home that needs extensive, costly repairs.
Underestimating Purchase Costs
When you’re getting a loan for a home, there are costs to consider other than the purchase price. These include:
- Stamp duty
- Title transfer fees
- The cost of mortgage registration
- Bank charges
- Title search fees
- Council rates
- Emergency service taxes
- Utility fees
- Home insurance
- Conveyancing fees
- Moving expenses
When applying for financing, consider all the above costs and budget accordingly. This ensures you have sufficient funding when settlement time comes around.
Becoming Emotionally Attached
When you’re searching for a primary residence, it’s easy to fall in love. However, you may be better served by thinking of your new home as an investment. Consider the returns you’ll get on the money you’re borrowing and think of how much you’ll make if you decide to sell. With this philosophy, you’ll make better buying decisions.
Buying a home is one of the biggest financial decisions you’ll ever make, and securing a mortgage loan is part of that decision. Before proceeding, consider talking to a loan advisor for no-obligation, unbiased advice. Your advisor will explain your loan options and recommend the right mortgage for your needs. By covering your bases before you get a mortgage, you’re more likely to end up in a home you can really afford.