If you are thinking of buying your first home, you are likely feeling rather excited about the whole thing. The idea of no longer having to pay rent, follow other people’s rules, or share your personal space is a game-changer, but there are things you need to put in place and consider before you go ahead.
It’s one of the biggest financial commitments you will ever make, so you need to take your time over it.
Here are 5 things every buyer should consider when purchasing their first home.
Do you have the required deposit?
Since the property bubble burst some time ago due to sub-prime lending, financial institutions are far more cautious about who they will lend to these days. It has resulted in many of them requesting a much larger deposit than was previously the case. You may find a few lenders that will offer 100% mortgages, but it’s not as common as it used to be.
The larger the deposit you have, the more likely your mortgage application is to be accepted. A higher deposit equates to less risk to the lender and so will usually attract preferential mortgage rates.
Does the property need lots of work?
You must remember that buying a home is a huge commitment, so you shouldn’t make any rash decisions and buy the first property you see. Rather than buying something that is in walk-in condition, you may prefer to buy a home that needs some work done. This is a good idea if you are fairly good at DIY as they will usually be a little cheaper.
If the property you have seen requires extensive refurbishment, you must be realistic and decide if you are taking on too much. For example, there is a vast difference between retiling a small bathroom and doing a bit of decorating when compared to a kitchen refit or complete wood window installation. Buy a property that will fit within the parameters of your capabilities, or you could end up regretting your purchase.
Do you have sufficient income for a mortgage?
As well as a deposit, being approved for a mortgage also comes down to your income. Most lenders will calculate how much you can borrow based on around 3-4 times your income. If you are purchasing a home with someone else, it’s usually around 2.5 times both salaries combined. There are many mortgage calculators online which will give you a good indication of your borrowing power but, it’s always a good idea to speak to an independent mortgage advisor who can discuss the best deals available to you.
There are many different mortgage types to choose from, such as variable or offset, but a fixed rate mortgage is a good choice, particularly for first-time buyers. Your monthly payment will not change during the term of your fixed rate, which will make it far easier for you when putting together a budget.
Does the area have good amenities?
You may have found the house of your dreams, but does it have the amenities you need close by? Have a good wander around the area during the day and at night before you decide if it’s the right location for you. Just search for the area you would like to purchase in – for example, Indianapolis homes for sales.
If you have children or intend to have them any time soon, then it’s wise to research the reputation of local schools before committing to a purchase. If you have a busy social life, you may want to purchase somewhere near the center of town where you should have a good range of restaurants and bars to choose from whenever the mood takes you. Although finding the right house is a priority, don’t lose sight of the other things in your life that are important.
Can you afford it?
Obtaining a mortgage is one thing, but you also have to consider whether you can afford the monthly costs associated with owning a home. As well as heating, lighting, and power, you will also have to account for food, any local authority taxes as well as your usual day-to-day living expenses. It’s a good idea to draw up a monthly budget and calculate how much everything is going to cost, then work out from there how much you can afford.
It may be that you initially need to buy a smaller home that is cheaper to run, or if it’s just not feasible doing it alone, consider renting out one of your rooms until you can afford the monthly expenditure.