Buying property is a significant and life-changing decision. It’s an opportunity to stand on your own two feet, create a home of your own, and take on one of life’s greatest responsibilities.
But before you start your home-owning journey, there’s a bit to consider.
Is now a good time in your life to buy a house? Can I afford it? Where do I want to buy?
We explore some of these important questions below.
Are you financially ready to buy a home?
The first, and arguably most important question, can I afford to buy a house?
Determining whether or not you are financially stable enough to take on a mortgage is layered.
To start, have a sound understanding of your finances. This includes your income, expenses, savings and existing debts. This will determine how much you could realistically offer as a deposit on your future home.
It also helps you make important future decisions. Is it better to pay my mortgage weekly? Do I need a guarantor?
Where do you want to live?
So you’re probably wondering, how much do I need to save for a house deposit? It all comes down to the type of home you want to buy, its size and the location.
While many of us have big dreams, the key to making homeownership a reality is to be as realistic as you can.
Start by researching properties around the area or suburb you’d like to live in. How much are they selling for? Are they selling over reserve? Based on these figures, and the work of your mortgage broker, you can roughly determine which areas are within your budget and which aren’t.
You should also consider the kind of lifestyle you’re looking for, and things that you’d like to be close to.
Is there a grocery store within comfortable walking or driving distance? Are their schools, doctors, and healthcare professionals nearby?
The amenities, particularly those external to your property are one of the most highly considered factors for any potential buyer or renter, and it also adds security to your investment.
If you’re looking to buy property in Melbourne, monitor the auctions and property listings in your areas of interest for several months prior to purchase, as well as the average property value. This way, you’ll know what to expect and there’s no surprises.
What is a credit score? How does it help me buy a home?
Once you’ve sured up your finances and location of choice, it’s time to speak to a mortgage broker! Mortgage brokers are a free service used by buyers to determine their borrowing capacity.
A key factor in determining your borrowing capacity is your credit score.
Your credit score is determined on request by a credit reporting agency. It is based on your borrowing and repayment history, factoring in credit cards as well as ‘Buy Now, Pay Later’ platforms like Afterpay and ZipPay.
Lenders will use this score, alongside their own risk criteria, to decide whether to lend to you, how much and at what rate of interest.
So you might be wondering, what is a good credit score to buy a house?
Credit scores are generally numbered between 0 – 1000, with HR Block noting that most credit scores above 700 are considered good by most major credit reporting agencies in Australia.
If your credit score isn’t what you’d like it to be, don’t panic. Credit scores are based on your current financial situation as soon as a check is requested. In the lead up to buying a property, it’s best to have cleared all of your debts, and pay your bills on time to keep your credit score as strong as possible.
What is my borrowing capacity?
Once you’ve determined your deposit and location of choice, it’s time to work out your borrowing capacity, and secure a home loan!
Things like steady employment and financial stability are critical factors in securing a home loan, as the lender is often looking for signs of stability.
Your mortgage broker will work with you to find the best home loan to suit your circumstances. Before you contact a lender, be sure to be debt-free and financially secure to have the best chance at securing your loan!
But the most important step in choosing to buy a home? Be confident and excited! You’re approaching a monumental chapter in your life, and that deserves to be celebrated!
If you’re wondering how to buy a house in Melbourne, you’ve come to the right place! If you have any questions, or want to know more about what life at Exford Waters has to offer, contact our Estate Manager Sarah on 0499 123 119 today!
Disclaimer: our financial advice is general in nature, please seek a professional for additional information.