If you are about to take your first step onto the property ladder, you are probably feeling a mixture of excitement and apprehension. It can be quite daunting, but if you are well prepared, it should make the journey far smoother. Here are 4 things that every first-time buyer should know.
One of the first things you should do is find out what borrowing power you have. All lenders have different lending criteria, and the rates available will vary depending on the level of deposit you have. Unless you feel confident to deal with the whole thing yourself, it’s a good idea to speak to a broker who can arrange a mortgage for you and give you an indication of the best deals available. Once your mortgage has been approved and an offer of loan issued, the fun part can begin, and you can start viewing properties that fall within your financial means.
Don’t be fooled into thinking that being new to buying property before puts you at a disadvantage. Assuming you have all the required deposits and funding in place, you are the ideal buyer! Your purchase won’t be subject to selling an existing property, there is no sales chain, and you are more likely to be flexible in terms of entry date. This all equates to a smoother transaction and minimizes the risk of you backing out, so use this as a negotiating tool when agreeing on a final sales price.
A property can look great on the surface but can have many hidden issues lurking beneath, so it’s a good idea to arrange for a specialist to inspect the property. They will carry out various checks and then issue you with a report outlining any issues they have come across in terms of things like the roof, plumbing, electrics, and so on. Inspection not only equips you with a negotiating tool in terms of price but will also give you peace of mind that you aren’t buying a nightmare of a property that is harboring a host of problems.
You may be able to afford the monthly mortgage payments, but have you considered the other monthly outgoings that go hand in hand with owning a property? Utility bills, insurances, and ongoing maintenance costs (to name but a few), all add up so you must spend some time calculating whether this purchase is going to be affordable in the long term. Write down all of your approximate outgoings and look to save around 10% as a contingency each month. This will come in very handy if something unexpected happens like a leaky roof or a boiler breakdown. You may need to buy furniture or appliances when you first move in, so plan ahead and be realistic in your approach. The more prepared you are, the less stressful the overall process will be.
Obtaining a mortgage loan is drastically different than it was even a couple of years ago. Banks and lending institutions are becoming increasingly hesitant to lend money due to the financial crisis gripping the nation and the only thing that less-than-perfect credit will get you is a rejection letter.
If, however, you have done your part by maintaining an exemplary credit rating and have pinched and saved for a substantial down payment (think 20 percent), then you may be well on your way to purchasing your first Boston condo.
An important first step in obtaining a mortgage loan is getting preapproved for a loan by a lender. For any first-time homebuyer, this should precede any other moves you make, including looking for homes. A preapproval letter from a lending institution.
A preapproval letter will not only show sellers that you are creditworthy and are serious about purchasing a home, but will also give you a clear picture of what size loan you can realistically afford. It will also help you in negotiations. For example:
Couple A immediately heads to the financial institution of their choice and obtains a preapproval letter. Couple B skips this important first step and instead heads out to search for their dream Dallas County property.
Both couples end up falling in love with the same property, and both couples put in an offer.
If you guessed a couple A, you’re right. It is unlikely that a seller will accept the offer from Couple B because of the uncertainty of whether they can afford the home or even get approved for a mortgage.
Couple A, on the other hand, was prepared to make an offer, and the seller was comfortable accepting their offer because they were prepared and ready to own their first home.
The bottom line: make getting preapproved your first priority!