Buying a new home is one of the most significant investment decisions you will ever make. It is also one of the most expensive purchases. Therefore, you mustn’t make a rushed decision when choosing a house and a property for sale in the market. Here are some things you need to ask before you make financial decisions and costs involved on your way to house ownership.
Are You Ready for the Investment?
You are not investing a small amount and may have to borrow a large percentage of the house price. If you are going to buy on credit, remember that it might be a long-term commitment and therefore need to keep your finances in order. Most lenders would want a solid statement backed by a history of a stable job or business. Before you start looking at lenders, have a conversation with an accountant to help you know if you can meet the new requirements.
Get Pre-approved for a Loan before Searching for a House
This approval is also called approval in principle and helps you determine how much money you can get for your lender should you find a house. This helps you set a price range for the house or property you are looking at. Some house sellers have some financing plans that can help you get the cash to buy the house. However, you will be required to share your financial information that includes the income, savings, credit report and any savings for review.
Determine the Extra Costs in Buying Property
A house costs more than the listed price. There are obligations involved in the transfer of title that will cost you more than what you plan to spend. Here are some of them.
- Stamp duty: You will pay 3%- 4% of the value of the land as stamp duty according to Southern Australia regulations.
- Legal and conveyancing: the cost of the legal fees depend on the amount of work that will go to the conveyancing along with legal checks. This may be as little as $1,000 to as much as $3,000
- Building and inspection fee: It is important that you have a full inspection that includes pest and structural integrity inspection. This may cost you anything between $400 and $500
- Finance and Legal Costs: If your loan surpasses 80% of the value of the house, there will be an additional cost to pay the LMI to cover the lender in case of a default. Besides, you will be required to pay for home insurance before taking up the house. The cost of applying for a mortgage varies depending on the value of the property. Some lenders also charge a valuation fee before releasing the cash.
Your home value should be your total loan and deposit minus the above costs so that you have enough to cover all the obligations.
Put your Financial House in Order before Taking a Loan
Financial planning is vital before investing in one of the houses for sale across the country. This ensures that you can pay your mortgage premiums and still handle other financial responsibilities. Besides, it is important to pick a home of the value that you are able to pay without having to live on a shoestring budget.
