Buying your first time home is no easy task as this single purchase will leave you in debt for thousands of dollars that you’ll have to pay for the next decade or so of your life. Here are some tips that should help the buying and paying process easier as a homeowner.
Know Your Credit Score and How it Impacts Your Mortgage
Buying real estate in Whittlesea, Victoria starts with your credit score. A credit score of 620 is usually needed to be accepted for a mortgage. With a credit score of around 760 or more, you’ll be getting an interest rate of around 4% or less, depending on the lender. That being the case, you’ll need to have your credit score on hand so you’ll know what kind of terms you can demand from the lender. If your score is bad, it’s usually best to increase it before actually borrowing.
Start Saving Now to Increase Initial Payment
The common first payment is around 20% of the value of the home, and the rest will be paid for by the loan. Nowadays, however, banks accept a down payment of so much less – some even allowing as little as 3% of the total value. While this might seem like a good thing, the fact is that lower down payment would mean higher rates and longer paying period. That being the case, try to boost your down payment – as high as you can.
Choose Between Fixed and Adjustable Rate
Most lenders today give you the option between a fixed and adjustable rate. There’s no winning choice between these two. An adjustable rate usually takes into consideration both extremes – you have a low-interest rate or a high one. A fixed, however, will tie you down to the same rate even if the market becomes better.
Get a Preapproval Letter Before Anything Else
Make sure to get a preapproval letter to know where you’re starting. A preapproval letter tells you what kind of loan and rates the lender is willing to offer considering your current financial situation. The preapproval letter tells you whether you can make changes in your situation to perhaps improve your rates. This also helps improve your standing because lenders view preapproval letters as a sign of your seriousness. It definitely improves your standing against other borrowers.
Consider the Incremental Costs
While you may have paid more for the down payment, keep in mind that it won’t be the only amount you’ll need to pay to conclude this deal. Closing costs, taxes, move-in expenses, and so on, will add up over time and may be tough to meet if you only budgeted for the down payment of the mortgage. Home inspections will also cost you and not something you should skip for the sake of saving money.
Of course, these are just some of the things to keep in mind when buying a home for the very first time. Keep in mind that even if you intend to keep this as your future home, it’s still essential to maintain its value through proper repair and improvements.