No matter how eager you are to buy your first home, there are a few things you need to do before you’re ready to bid or start negotiating.
1. Know what you can pay
The lender will assess your borrowing capacity based on what you earn, owe, spend and own. They won’t lend you more than their algorithms tell them you can manage. But it’s also important that you’re comfortable with the repayments and commitment you’re making for the next 30 years or so.
Will you be able to manage if interest rates rise? What if you lose your job or have to take a couple of months off work? Do you have a buffer? If you’re buying an investment property, how long can you manage without a tenant?
Maybe you’re better off to buy something a little smaller or a little further from the city if you’re going to be placing too much financial stress on yourself.
Make sure you have pre-approval on a loan, and also make sure you’re going to be able to manage the repayments.
2. Get picky with the home loan
Don’t just take the first product offered because it sounds good or it seems easy. Really understand what you’re getting yourself into. Find out the features of the loan and the cost of those features. Something like an offset account is a great feature and can reduce your debt faster, but sometimes it costs more to have it, and if you’re not going to use it, you’re probably paying too much.
Talk to me, ask questions, think about what you need today and what you’ll need in two or three years. Do you need flexibility or low cost?
Choose the loan with the best rate and the best features for you.
3. Leave your emotions at home
Finding your dream home is an emotional thing. You start to imagine how life will be once you own that home or investment property. It’s a huge step and often a massive relief that the hunt is soon to be over! But when it comes to negotiating or bidding, you need to kerb those emotions – or step away and let someone else do it for you.
The key to negotiating and bidding is to know the current value of the property. This is dependent on a couple of things, like recent comparable sales and how many other people have also fallen in love with the property.
Don’t fall into the trap of paying too much – you may not be able to get finance if the lender’s valuation doesn’t match up with the sale price.
Remember, the agent’s job is to get the best price for the vendor, and their commission is based on that – so no matter how friendly and helpful they are, they’re on the other guy’s side! As your broker, I can provide you with data on recent sales and you can look through real estate websites for recent sales.
Do your homework and bid with your brain, not your heart. If you miss this one, there will be another…
Let me know when you need help! I’ll be ready when you are.