6 Things to Consider Before You Buy Your First Home

August 23, 2021

Buying a house is an exciting time, but it can also be quite daunting. There are so many things to consider when looking for a home, and with all the information out there it’s hard to know what is important and what isn’t. 

To help you get started on your journey of finding the perfect place, here are some questions that first-time buyers should ask themselves.

How Much Can I Afford? 

There are some very important considerations when deciding how much to spend on a house, and everyone will have their own personal preference. To figure out what you can afford, it’s best to start with your monthly income (from all sources) as well as the amount of debt that you currently owe. 

The next step is figuring out how much money would be left over after paying for all your other bills at the same time each month – like car payments or student loans. 

The difference between this number and the total mortgage payment is what you could potentially use towards an initial down payment if needed.

Choosing a lower-priced home may also help make up for possible extra costs during the first few years in terms of utilities or repairs.

What are the different types of mortgage loans available?

There are many different types of mortgage loans available to first-time buyers. The type that is best for you will depend on factors like your credit, how much money you have saved up for a down payment, and the length of time you plan to stay in this home. 

Below are some common loans available: 

FHA Loan – FHA stands for Federal Housing Administration, which offers a loan with low interest rates and minimal fees if there is at least a five percent or more down payment (that’s $5000 if buying an average priced house). 

LTV Loan – LTV stands for “loan to value” and is the ratio between what you owe on your home compared to its worth. With this type of loan, even if there is no money down or closing costs due at purchase time (which some lenders offer), it requires regular monthly payments so that your principal debt balance gradually lowers over time.

CASH-OUT Refinance – This option allows those who have enough cash saved up for their initial down payment as well as any fees like title insurance premiums and appraisal costs to get rid of their old mortgage.

A mortgage is a huge financial commitment, and you want to do everything possible to ensure you get the best rate and terms available. For example, in the US, with SoFi mortgage rates, homeowners can save money with rates as low as 3.625% APR* and no hidden fees or closing costs. 

Soho Listing @ 56 St Georges Road, Toorak, VIC

The difference between a fixed and variable rate mortgage.

One of the most important considerations when buying a home is deciding on what type of mortgage loan to take. Fixed-rate mortgages are more common, and they offer homeowners some protection from interest rates skyrocketing each year.

The downside is that if you want your payments to stay low after an initial period (usually five years) or pay off the loan quickly by paying extra every month, you won’t have any flexibility in how much money it costs each month – which will make budgeting difficult for many people. 

Variable Rate Mortgages can be risky as well because their monthly payments could go up significantly over time even if there was no change at all in the index used to calculate them.

They also do not have a pre-defined term, which means you could end up paying more in interest or having your monthly payment change each month.

What is a home inspection, and should I have one before buying my house?

A home inspection is a comprehensive evaluation of the property that you are considering buying. The inspector looks at all aspects of the house, inside and out, to make sure it meets certain standards such as electrical wiring or insulation levels. 

The benefits of this type of pre-purchase inspection:

First, if any problems exist then they can be fixed before you buy your new home – which will help keep down costs like having to replace large systems like heating or air conditioning units later on. 

Second, inspections act as reassurance for buyers who may want more than just their gut feeling about what kind of shape the property might be in when purchasing a house.

Even though some sellers offer warranties against major defects and structural issues (which can be a good idea to buy with the house) having an inspection can help you know for sure what’s going on inside and out.

What is the First Homeowners Grant?

If you are the first person on your street to buy a new home, then chances are very good that you can qualify for what’s called the First Homeowners Grant. 

This is a government-funded program designed to help offset some of the costs associated with buying your first house.

This one-off payment can be a few thousand dollars to more than $20,000 (depending on your state), while it also offers major stamp duty discounts – and even waiving stamp duty entirely – for certain properties. Making a noticeable difference for first home buyers saving for a deposit. 

Well that all sounds great, for each state and territory there is a different criterion you would have to meet. A general criterion that does not change much include:

  • Being 18 years old or over
  • Being an Australian citizen or permanent resident
  • Being an individual rather than a company or a trustee
  • You must be a first-time recipient of the grant
  • You must be a first-time residential property owner.
  • You were also required to move into your new home within a year and live there continuously for at least 6 months.

This grant is making it possible for most people – especially those without much income at all – to afford homeownership so they don’t need to move into more expensive rental housing units. 

Soho Listing @ 215/1 Clara Street, South Yarra, VIC

What are the extra costs involved in buying a home?

It’s not just the actual price of the house that you need to think about when buying a home! You will also have monthly expenses like water and electricity bills, insurance for your property as well as council or state taxes. 

These kinds of payments can be more frequent than others – such as paying rent every week or fortnight – so it’s important to budget for these kinds of costs in addition to thinking about how much money you’ll need upfront when purchasing a new place. 

Don’t forget maintenance, too! There are often small repairs needed by homeowners from time to time which might cost between $50 and several hundred dollars depending on what they entail (like replacing an old heater with gas).

Now that we’ve pointed out the key areas you should consider prior to purchasing your first property it’s important to seek out an unbiased report so you can be sure to receive an accurate, fair market value on the home before taking the leap. Click here to consult with a team of professionals.

John Anderson
John Anderson is one of Melbourne’s leading experts in commercial and residential property valuation services. John is a registered Chartered Surveyor and Senior Property Valuer with over 20 years of professional experience providing property valuations across Melbourne and Victoria.
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Our AI match engine will match you with over 150,000+ properties and you can swipe away or shortlist easily. Making your home buying journey faster and easier.